Correlation Between AmTrust Financial and Argo Group

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

Diversification Opportunities for AmTrust Financial and Argo Group

0.47

Correlation Coefficient

AmTrust Financial  Argo Group

Very weak diversification

The 3 months correlation between AmTrust and Argo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Argo Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group International 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group International has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Argo Group go up and down completely randomly.

Pair Corralation between AmTrust Financial and Argo Group

Assuming the 90 days horizon AmTrust Financial Services is expected to under-perform the Argo Group. In addition to that, AmTrust Financial is 4.96 times more volatile than Argo Group International. It trades about -0.02 of its total potential returns per unit of risk. Argo Group International is currently generating about 0.18 per unit of volatility. If you would invest  2,400  in Argo Group International on September 4, 2024 and sell it today you would earn a total of  87.00  from holding Argo Group International or generate 3.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

AmTrust Financial Services  vs.  Argo Group International

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Argo Group International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AmTrust Financial and Argo Group

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

The idea behind AmTrust Financial Services and Argo Group International 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.