Correlation Between AmTrust Financial and Donegal Group

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

Diversification Opportunities for AmTrust Financial and Donegal Group

-0.55

Correlation Coefficient

AmTrust Financial  Donegal Group

Excellent diversification

The 3 months correlation between AmTrust and Donegal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Donegal Group go up and down completely randomly.

Pair Corralation between AmTrust Financial and Donegal Group

Assuming the 90 days horizon AmTrust Financial Services is expected to under-perform the Donegal Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, AmTrust Financial Services is 1.93 times less risky than Donegal Group. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Donegal Group B is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,460  in Donegal Group B on October 20, 2024 and sell it today you would earn a total of  28.00  from holding Donegal Group B or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

AmTrust Financial Services  vs.  Donegal Group B

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.

Donegal Group B

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmTrust Financial and Donegal Group

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

The idea behind AmTrust Financial Services and Donegal Group B 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.