Correlation Between Argo Group and AmTrust Financial

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

By analyzing existing cross correlation between Argo Group International and AmTrust Financial Services, you can compare the effects of market volatilities on Argo Group and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Group and AmTrust Financial.

Diversification Opportunities for Argo Group and AmTrust Financial

0.29

Correlation Coefficient

Argo Group  AmTrust Financial

Modest diversification

The 3 months correlation between Argo and AmTrust is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group International and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 International are associated (or correlated) with AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Argo Group i.e., Argo Group and AmTrust Financial go up and down completely randomly.

Pair Corralation between Argo Group and AmTrust Financial

Assuming the 90 days trading horizon Argo Group is expected to generate 1.09 times less return on investment than AmTrust Financial. But when comparing it to its historical volatility, Argo Group International is 5.13 times less risky than AmTrust Financial. It trades about 0.18 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,350  in AmTrust Financial Services on September 12, 2024 and sell it today you would earn a total of  40.00  from holding AmTrust Financial Services or generate 2.96% return on investment over 90 days.

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

Argo Group International  vs.  AmTrust Financial Services

Argo Group International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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. Despite somewhat strong forward indicators, AmTrust Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Argo Group and AmTrust Financial

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

The idea behind Argo Group International and AmTrust Financial Services 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.