Correlation Between Arch Capital and International General

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

Diversification Opportunities for Arch Capital and International General

-0.04

Correlation Coefficient

Arch Capital  International General

Good diversification

The 3 months correlation between Arch and International is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and International General Insuranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International General 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 International General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International General has no effect on the direction of Arch Capital i.e., Arch Capital and International General go up and down completely randomly.

Pair Corralation between Arch Capital and International General

Given the investment horizon of 90 days Arch Capital Group is expected to under-perform the International General. But the stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 1.28 times less risky than International General. The stock trades about -0.14 of its potential returns per unit of risk. The International General Insurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,592  in International General Insurance on November 28, 2024 and sell it today you would earn a total of  66.00  from holding International General Insurance or generate 2.55% return on investment over 90 days.

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

Arch Capital Group  vs.  International General Insuranc

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 latest inconsistent performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

International General

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International General Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, International General is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arch Capital and International General

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

The idea behind Arch Capital Group and International General Insurance 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 CEOs Directory module to screen CEOs from public companies around the world.