Correlation Between Arch Capital and Ageas SA/NV

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

Diversification Opportunities for Arch Capital and Ageas SA/NV

-0.24

Correlation Coefficient

Arch Capital  Ageas SA/NV

Very good diversification

The 3 months correlation between Arch and Ageas is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and ageas SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ageas SA/NV 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 Ageas SA/NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ageas SA/NV has no effect on the direction of Arch Capital i.e., Arch Capital and Ageas SA/NV go up and down completely randomly.

Pair Corralation between Arch Capital and Ageas SA/NV

Assuming the 90 days horizon Arch Capital Group is expected to under-perform the Ageas SA/NV. But the preferred stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 1.02 times less risky than Ageas SA/NV. The preferred stock trades about -0.02 of its potential returns per unit of risk. The ageas SANV is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  4,833  in ageas SANV on December 28, 2024 and sell it today you would earn a total of  1,161  from holding ageas SANV or generate 24.02% 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.  ageas SANV

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. In spite of very healthy essential indicators, Arch Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ageas SA/NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ageas SANV are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ageas SA/NV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arch Capital and Ageas SA/NV

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

The idea behind Arch Capital Group and ageas SANV 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.