Correlation Between Equitable Holdings and Arch Capital

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

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

Diversification Opportunities for Equitable Holdings and Arch Capital

0.92

Correlation Coefficient

Equitable Holdings  Arch Capital

Almost no diversification

The 3 months correlation between Equitable and Arch is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings i.e., Equitable Holdings and Arch Capital go up and down completely randomly.

Pair Corralation between Equitable Holdings and Arch Capital

Assuming the 90 days trading horizon Equitable Holdings is expected to generate 1.1 times more return on investment than Arch Capital. However, Equitable Holdings is 1.1 times more volatile than Arch Capital Group. It trades about -0.21 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.31 per unit of risk. If you would invest  2,196  in Equitable Holdings on September 22, 2024 and sell it today you would lose (84.00) from holding Equitable Holdings or give up 3.83% of portfolio value over 90 days.

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

Equitable Holdings  vs.  Arch Capital Group

Equitable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest weak performance, the Preferred Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Equitable Holdings and Arch Capital

The main advantage of trading using opposite Equitable Holdings and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equitable Holdings 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 Equitable Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.