Correlation Between AmTrust Financial and Aeon

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

Diversification Opportunities for AmTrust Financial and Aeon

0.31

Correlation Coefficient

AmTrust Financial  Aeon

Weak diversification

The 3 months correlation between AmTrust and Aeon is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Aeon go up and down completely randomly.

Pair Corralation between AmTrust Financial and Aeon

Assuming the 90 days horizon AmTrust Financial is expected to generate 2.81 times less return on investment than Aeon. In addition to that, AmTrust Financial is 4.05 times more volatile than Aeon Co. It trades about 0.04 of its total potential returns per unit of risk. Aeon Co is currently generating about 0.5 per unit of volatility. If you would invest  2,045  in Aeon Co on September 26, 2024 and sell it today you would earn a total of  20.00  from holding Aeon Co or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	3.2%
Values	Daily Returns

AmTrust Financial Services  vs.  Aeon Co

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. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aeon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AmTrust Financial and Aeon

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

The idea behind AmTrust Financial Services and Aeon Co 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.