Correlation Between Argo Group and Arch Capital

Can any of the company-specific risk be diversified away by investing in both Argo Group and Arch Capital 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 Argo Group and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Argo Group 65 and Arch Capital Group, you can compare the effects of market volatilities on Argo Group and Arch Capital 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 Argo Group with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Group and Arch Capital.

Diversification Opportunities for Argo Group and Arch Capital

0.41

Correlation Coefficient

Argo Group  Arch Capital

Very weak diversification

The 3 months correlation between Argo and Arch is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group 65 and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and Argo Group 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 Argo Group 65 are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Argo Group i.e., Argo Group and Arch Capital go up and down completely randomly.

Pair Corralation between Argo Group and Arch Capital

Given the investment horizon of 90 days Argo Group 65 is expected to generate 1.01 times more return on investment than Arch Capital. However, Argo Group is 1.01 times more volatile than Arch Capital Group. It trades about 0.06 of its potential returns per unit of risk. Arch Capital Group is currently generating about 0.0 per unit of risk. If you would invest  2,154  in Argo Group 65 on September 2, 2024 and sell it today you would earn a total of  54.00  from holding Argo Group 65 or generate 2.51% return on investment over 90 days.

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

Argo Group 65  vs.  Arch Capital Group

Argo Group 65

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group 65 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Argo Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arch Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arch Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Arch Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Argo Group and Arch Capital

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

The idea behind Argo Group 65 and Arch Capital 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.