Correlation Between Bank Central and AmTrust Financial

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

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

Diversification Opportunities for Bank Central and AmTrust Financial

-0.45

Correlation Coefficient

Bank Central  AmTrust Financial

Very good diversification

The 3 months correlation between Bank and AmTrust is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Bank Central 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 Bank Central Asia 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 Bank Central i.e., Bank Central and AmTrust Financial go up and down completely randomly.

Pair Corralation between Bank Central and AmTrust Financial

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the AmTrust Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.28 times less risky than AmTrust Financial. The pink sheet trades about -0.09 of its potential returns per unit of risk. The AmTrust Financial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,354  in AmTrust Financial Services on December 29, 2024 and sell it today you would earn a total of  91.00  from holding AmTrust Financial Services or generate 6.72% return on investment over 90 days.

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

Bank Central Asia  vs.  AmTrust Financial Services

Bank Central Asia

Risk-Adjusted Performance

Very Weak

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

AmTrust Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank Central and AmTrust Financial

The main advantage of trading using opposite Bank Central and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central 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 Bank Central Asia 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.