Correlation Between Axa Equitable and Arch Capital

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

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

Diversification Opportunities for Axa Equitable and Arch Capital

-0.43

Correlation Coefficient

Axa Equitable  Arch Capital

Very good diversification

The 3 months correlation between Axa and Arch is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Axa 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 Axa Equitable 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 Axa 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 Axa Equitable i.e., Axa Equitable and Arch Capital go up and down completely randomly.

Pair Corralation between Axa Equitable and Arch Capital

Considering the 90-day investment horizon Axa Equitable Holdings is expected to generate 2.15 times more return on investment than Arch Capital. However, Axa Equitable is 2.15 times more volatile than Arch Capital Group. It trades about 0.01 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.46 per unit of risk. If you would invest  4,657  in Axa Equitable Holdings on September 22, 2024 and sell it today you would lose (5.00) from holding Axa Equitable Holdings or give up 0.11% of portfolio value over 90 days.

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

Axa Equitable Holdings  vs.  Arch Capital Group

Axa Equitable Holdings

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Axa Equitable Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Axa Equitable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating 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 Axa Equitable and Arch Capital

The main advantage of trading using opposite Axa Equitable and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axa Equitable 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 Axa 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.