Correlation Between Skechers USA and AmTrust Financial

Can any of the company-specific risk be diversified away by investing in both Skechers USA and AmTrust Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Skechers USA and AmTrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Skechers USA and AmTrust Financial Services, you can compare the effects of market volatilities on Skechers USA and AmTrust Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Skechers USA with a short position of AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skechers USA and AmTrust Financial.

Diversification Opportunities for Skechers USA and AmTrust Financial

0.25

Correlation Coefficient

Skechers USA  AmTrust Financial

Modest diversification

The 3 months correlation between Skechers and AmTrust is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Skechers USA and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Skechers USA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Skechers USA are associated (or correlated) with AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Skechers USA i.e., Skechers USA and AmTrust Financial go up and down completely randomly.

Pair Corralation between Skechers USA and AmTrust Financial

Considering the 90-day investment horizon Skechers USA is expected to under-perform the AmTrust Financial. In addition to that, Skechers USA is 1.1 times more volatile than AmTrust Financial Services. It trades about 0.0 of its total potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.05 per unit of volatility. If you would invest  1,273  in AmTrust Financial Services on September 25, 2024 and sell it today you would earn a total of  122.00  from holding AmTrust Financial Services or generate 9.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Skechers USA  vs.  AmTrust Financial Services

Skechers USA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Skechers USA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Skechers USA and AmTrust Financial

The main advantage of trading using opposite Skechers USA and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skechers USA position performs unexpectedly, AmTrust Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AmTrust Financial will offset losses from the drop in AmTrust Financial's long position.

The idea behind Skechers USA and AmTrust Financial Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.