Correlation Between Suntory Beverage and Arch Capital

Can any of the company-specific risk be diversified away by investing in both Suntory Beverage and Arch Capital 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 Suntory Beverage and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Suntory Beverage Food and Arch Capital Group, you can compare the effects of market volatilities on Suntory Beverage and Arch Capital 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 Suntory Beverage with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suntory Beverage and Arch Capital.

Diversification Opportunities for Suntory Beverage and Arch Capital

0.03

Correlation Coefficient

Suntory Beverage  Arch Capital

Significant diversification

The 3 months correlation between Suntory and Arch is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and Suntory Beverage 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 Suntory Beverage Food are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Suntory Beverage i.e., Suntory Beverage and Arch Capital go up and down completely randomly.

Pair Corralation between Suntory Beverage and Arch Capital

Assuming the 90 days horizon Suntory Beverage Food is expected to under-perform the Arch Capital. In addition to that, Suntory Beverage is 1.02 times more volatile than Arch Capital Group. It trades about -0.02 of its total potential returns per unit of risk. Arch Capital Group is currently generating about 0.0 per unit of volatility. If you would invest  8,506  in Arch Capital Group on December 19, 2024 and sell it today you would lose (52.00) from holding Arch Capital Group or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Suntory Beverage Food  vs.  Arch Capital Group

Suntory Beverage Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Suntory Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Arch Capital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arch Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arch Capital is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Suntory Beverage and Arch Capital

The main advantage of trading using opposite Suntory Beverage and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suntory Beverage position performs unexpectedly, Arch Capital 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 Arch Capital will offset losses from the drop in Arch Capital's long position.

The idea behind Suntory Beverage Food and Arch Capital Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.