Correlation Between James River and AMERISAFE

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

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

Diversification Opportunities for James River and AMERISAFE

-0.38

Correlation Coefficient

James River  AMERISAFE

Very good diversification

The 3 months correlation between James and AMERISAFE is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding James River Group and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE and James River 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 James River Group are associated (or correlated) with AMERISAFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERISAFE has no effect on the direction of James River i.e., James River and AMERISAFE go up and down completely randomly.

Pair Corralation between James River and AMERISAFE

Given the investment horizon of 90 days James River Group is expected to under-perform the AMERISAFE. In addition to that, James River is 3.97 times more volatile than AMERISAFE. It trades about -0.02 of its total potential returns per unit of risk. AMERISAFE is currently generating about 0.05 per unit of volatility. If you would invest  5,096  in AMERISAFE on December 29, 2024 and sell it today you would earn a total of  171.00  from holding AMERISAFE or generate 3.36% return on investment over 90 days.

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

James River Group  vs.  AMERISAFE

James River Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days James River Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, James River is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

AMERISAFE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AMERISAFE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with James River and AMERISAFE

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

The idea behind James River Group and AMERISAFE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.