Correlation Between AmTrust Financial and Chubb

Can any of the company-specific risk be diversified away by investing in both AmTrust Financial and Chubb 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 AmTrust Financial and Chubb into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AmTrust Financial Services and Chubb, you can compare the effects of market volatilities on AmTrust Financial and Chubb 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 AmTrust Financial with a short position of Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Chubb.

Diversification Opportunities for AmTrust Financial and Chubb

-0.32

Correlation Coefficient

AmTrust Financial  Chubb

Very good diversification

The 3 months correlation between AmTrust and Chubb is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and AmTrust Financial 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 AmTrust Financial Services are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Chubb go up and down completely randomly.

Pair Corralation between AmTrust Financial and Chubb

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 1.16 times more return on investment than Chubb. However, AmTrust Financial is 1.16 times more volatile than Chubb. It trades about 0.07 of its potential returns per unit of risk. Chubb is currently generating about 0.04 per unit of risk. If you would invest  1,196  in AmTrust Financial Services on September 19, 2024 and sell it today you would earn a total of  135.00  from holding AmTrust Financial Services or generate 11.29% return on investment over 90 days.

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

AmTrust Financial Services  vs.  Chubb

AmTrust Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, AmTrust Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AmTrust Financial and Chubb

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

The idea behind AmTrust Financial Services and Chubb 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.