Correlation Between Arch Capital and Allianz SE

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

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

Diversification Opportunities for Arch Capital and Allianz SE

0.51

Correlation Coefficient

Arch Capital  Allianz SE

Very weak diversification

The 3 months correlation between Arch and Allianz is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Allianz SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz SE and Arch Capital 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 Arch Capital Group are associated (or correlated) with Allianz SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz SE has no effect on the direction of Arch Capital i.e., Arch Capital and Allianz SE go up and down completely randomly.

Pair Corralation between Arch Capital and Allianz SE

Given the investment horizon of 90 days Arch Capital Group is expected to under-perform the Allianz SE. But the stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 1.57 times less risky than Allianz SE. The stock trades about -0.31 of its potential returns per unit of risk. The Allianz SE is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  31,364  in Allianz SE on September 22, 2024 and sell it today you would earn a total of  120.00  from holding Allianz SE or generate 0.38% return on investment over 90 days.

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

Arch Capital Group  vs.  Allianz SE

Arch Capital Group

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Allianz SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arch Capital and Allianz SE

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

The idea behind Arch Capital Group and Allianz SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.