Correlation Between Intact Financial and AmTrust Financial

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

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

Diversification Opportunities for Intact Financial and AmTrust Financial

0.27

Correlation Coefficient

Intact Financial  AmTrust Financial

Modest diversification

The 3 months correlation between Intact and AmTrust is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Intact 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 Intact Financial 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 Intact Financial i.e., Intact Financial and AmTrust Financial go up and down completely randomly.

Pair Corralation between Intact Financial and AmTrust Financial

Assuming the 90 days horizon Intact Financial is expected to generate 1.4 times more return on investment than AmTrust Financial. However, Intact Financial is 1.4 times more volatile than AmTrust Financial Services. It trades about 0.02 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.03 per unit of risk. If you would invest  19,275  in Intact Financial on December 1, 2024 and sell it today you would earn a total of  311.00  from holding Intact Financial or generate 1.61% return on investment over 90 days.

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

Intact Financial  vs.  AmTrust Financial Services

Intact Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AmTrust Financial

Risk-Adjusted Performance

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 Intact Financial and AmTrust Financial

The main advantage of trading using opposite Intact Financial and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact Financial 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 Intact Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.