Correlation Between Arch Capital and Axa Equitable

Can any of the company-specific risk be diversified away by investing in both Arch Capital and Axa Equitable 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 Axa Equitable 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 Axa Equitable Holdings, you can compare the effects of market volatilities on Arch Capital and Axa Equitable 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 Axa Equitable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Axa Equitable.

Diversification Opportunities for Arch Capital and Axa Equitable

0.16

Correlation Coefficient

Arch Capital  Axa Equitable

Average diversification

The 3 months correlation between Arch and Axa is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Axa Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axa Equitable Holdings 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 Axa Equitable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axa Equitable Holdings has no effect on the direction of Arch Capital i.e., Arch Capital and Axa Equitable go up and down completely randomly.

Pair Corralation between Arch Capital and Axa Equitable

Given the investment horizon of 90 days Arch Capital is expected to generate 4.0 times less return on investment than Axa Equitable. But when comparing it to its historical volatility, Arch Capital Group is 1.38 times less risky than Axa Equitable. It trades about 0.04 of its potential returns per unit of risk. Axa Equitable Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,783  in Axa Equitable Holdings on December 26, 2024 and sell it today you would earn a total of  623.00  from holding Axa Equitable Holdings or generate 13.03% return on investment over 90 days.

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

Arch Capital Group  vs.  Axa Equitable Holdings

Arch Capital Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Capital Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Arch Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Axa Equitable Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axa Equitable Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Axa Equitable demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arch Capital and Axa Equitable

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

The idea behind Arch Capital Group and Axa Equitable Holdings 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.