Correlation Between AmTrust Financial and Franchise

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

Diversification Opportunities for AmTrust Financial and Franchise

0.47

Correlation Coefficient

AmTrust Financial  Franchise

Very weak diversification

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

Pair Corralation between AmTrust Financial and Franchise

If you would invest  1,365  in AmTrust Financial Services on September 14, 2024 and sell it today you would earn a total of  110.00  from holding AmTrust Financial Services or generate 8.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

AmTrust Financial Services  vs.  Franchise Group

AmTrust Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AmTrust Financial and Franchise

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

The idea behind AmTrust Financial Services and Franchise Group 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.