Correlation Between AmTrust Financial and Radcom

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

Diversification Opportunities for AmTrust Financial and Radcom

0.76

Correlation Coefficient

AmTrust Financial  Radcom

Poor diversification

The 3 months correlation between AmTrust and Radcom is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Radcom go up and down completely randomly.

Pair Corralation between AmTrust Financial and Radcom

Assuming the 90 days horizon AmTrust Financial is expected to generate 4.83 times less return on investment than Radcom. But when comparing it to its historical volatility, AmTrust Financial Services is 1.74 times less risky than Radcom. It trades about 0.04 of its potential returns per unit of risk. Radcom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  981.00  in Radcom on September 18, 2024 and sell it today you would earn a total of  200.00  from holding Radcom or generate 20.39% return on investment over 90 days.

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

AmTrust Financial Services  vs.  Radcom

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Radcom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmTrust Financial and Radcom

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

The idea behind AmTrust Financial Services and Radcom 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.