Correlation Between AmTrust Financial and RCS MediaGroup

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

Diversification Opportunities for AmTrust Financial and RCS MediaGroup

0.53

Correlation Coefficient

AmTrust Financial  RCS MediaGroup

Very weak diversification

The 3 months correlation between AmTrust and RCS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and RCS MediaGroup SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCS MediaGroup SpA 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 RCS MediaGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCS MediaGroup SpA has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and RCS MediaGroup go up and down completely randomly.

Pair Corralation between AmTrust Financial and RCS MediaGroup

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 1.19 times more return on investment than RCS MediaGroup. However, AmTrust Financial is 1.19 times more volatile than RCS MediaGroup SpA. It trades about -0.07 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about -0.1 per unit of risk. If you would invest  1,450  in AmTrust Financial Services on October 12, 2024 and sell it today you would lose (40.00) from holding AmTrust Financial Services or give up 2.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

AmTrust Financial Services  vs.  RCS MediaGroup SpA

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.

RCS MediaGroup SpA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, RCS MediaGroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AmTrust Financial and RCS MediaGroup

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

The idea behind AmTrust Financial Services and RCS MediaGroup SpA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.