Correlation Between Arch Capital and Athene Holding

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

Diversification Opportunities for Arch Capital and Athene Holding

0.45

Correlation Coefficient

Arch Capital  Athene Holding

Very weak diversification

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

Pair Corralation between Arch Capital and Athene Holding

Assuming the 90 days horizon Arch Capital is expected to generate 3.23 times less return on investment than Athene Holding. But when comparing it to its historical volatility, Arch Capital Group is 1.56 times less risky than Athene Holding. It trades about 0.04 of its potential returns per unit of risk. Athene Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,624  in Athene Holding on September 4, 2024 and sell it today you would earn a total of  330.00  from holding Athene Holding or generate 20.32% return on investment over 90 days.

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

Arch Capital Group  vs.  Athene Holding

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

Athene Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Athene Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Athene Holding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arch Capital and Athene Holding

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

The idea behind Arch Capital Group and Athene Holding 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.