Correlation Between Tokio Marine and AmTrust Financial

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

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

Diversification Opportunities for Tokio Marine and AmTrust Financial

0.72

Correlation Coefficient

Tokio Marine  AmTrust Financial

Poor diversification

The 3 months correlation between Tokio and AmTrust is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tokio Marine Holdings and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Tokio Marine 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 Tokio Marine Holdings 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 Tokio Marine i.e., Tokio Marine and AmTrust Financial go up and down completely randomly.

Pair Corralation between Tokio Marine and AmTrust Financial

If you would invest  2,267  in Tokio Marine Holdings on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Tokio Marine Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Tokio Marine Holdings  vs.  AmTrust Financial Services

Tokio Marine Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokio Marine Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Tokio Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tokio Marine and AmTrust Financial

The main advantage of trading using opposite Tokio Marine and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokio Marine 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 Tokio Marine Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.