Correlation Between Arch Capital and Armada Acquisition

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

Diversification Opportunities for Arch Capital and Armada Acquisition

0.41

Correlation Coefficient

Arch Capital  Armada Acquisition

Very weak diversification

The 3 months correlation between Arch and Armada is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Armada Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Acquisition Corp 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 Armada Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Acquisition Corp has no effect on the direction of Arch Capital i.e., Arch Capital and Armada Acquisition go up and down completely randomly.

Pair Corralation between Arch Capital and Armada Acquisition

If you would invest (100.00) in Armada Acquisition Corp on October 26, 2024 and sell it today you would earn a total of  100.00  from holding Armada Acquisition Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Arch Capital Group  vs.  Armada Acquisition Corp

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. In spite of latest unfluctuating performance, the Preferred Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Armada Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Armada Acquisition is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arch Capital and Armada Acquisition

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

The idea behind Arch Capital Group and Armada Acquisition Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.