Correlation Between Arch Capital and Sampo OYJ

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

Diversification Opportunities for Arch Capital and Sampo OYJ

0.68

Correlation Coefficient

Arch Capital  Sampo OYJ

Poor diversification

The 3 months correlation between Arch and Sampo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Sampo OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampo OYJ 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 Sampo OYJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampo OYJ has no effect on the direction of Arch Capital i.e., Arch Capital and Sampo OYJ go up and down completely randomly.

Pair Corralation between Arch Capital and Sampo OYJ

Given the investment horizon of 90 days Arch Capital Group is expected to under-perform the Sampo OYJ. In addition to that, Arch Capital is 1.8 times more volatile than Sampo OYJ. It trades about -0.05 of its total potential returns per unit of risk. Sampo OYJ is currently generating about -0.08 per unit of volatility. If you would invest  2,249  in Sampo OYJ on September 2, 2024 and sell it today you would lose (116.00) from holding Sampo OYJ or give up 5.16% of portfolio value over 90 days.

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

Arch Capital Group  vs.  Sampo OYJ

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 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.

Sampo OYJ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sampo OYJ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sampo OYJ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arch Capital and Sampo OYJ

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

The idea behind Arch Capital Group and Sampo OYJ 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.