Correlation Between Arch Capital and ACAX Old

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

Diversification Opportunities for Arch Capital and ACAX Old

-0.45

Correlation Coefficient

Arch Capital  ACAX Old

Very good diversification

The 3 months correlation between Arch and ACAX is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and ACAX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACAX Old 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 ACAX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACAX Old has no effect on the direction of Arch Capital i.e., Arch Capital and ACAX Old go up and down completely randomly.

Pair Corralation between Arch Capital and ACAX Old

Assuming the 90 days horizon Arch Capital is expected to generate 3.13 times less return on investment than ACAX Old. But when comparing it to its historical volatility, Arch Capital Group is 1.09 times less risky than ACAX Old. It trades about 0.01 of its potential returns per unit of risk. ACAX Old is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,011  in ACAX Old on October 11, 2024 and sell it today you would earn a total of  44.00  from holding ACAX Old or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.81%
Values	Daily Returns

Arch Capital Group  vs.  ACAX Old

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.

ACAX Old

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arch Capital and ACAX Old

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

The idea behind Arch Capital Group and ACAX Old 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.