Correlation Between Arch Capital and NI Holdings
Can any of the company-specific risk be diversified away by investing in both Arch Capital and NI Holdings 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 Arch Capital and NI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and NI Holdings, you can compare the effects of market volatilities on Arch Capital and NI Holdings 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 Arch Capital with a short position of NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and NI Holdings.
Diversification Opportunities for Arch Capital and NI Holdings
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arch and NODK is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Arch Capital 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 Arch Capital Group are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Arch Capital i.e., Arch Capital and NI Holdings go up and down completely randomly.
Pair Corralation between Arch Capital and NI Holdings
Given the investment horizon of 90 days Arch Capital Group is expected to generate 1.37 times more return on investment than NI Holdings. However, Arch Capital is 1.37 times more volatile than NI Holdings. It trades about -0.01 of its potential returns per unit of risk. NI Holdings is currently generating about -0.3 per unit of risk. If you would invest 9,140 in Arch Capital Group on January 18, 2024 and sell it today you would lose (54.00) from holding Arch Capital Group or give up 0.59% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Arch Capital Group vs. NI Holdings
Performance |
Timeline |
Arch Capital Group |
NI Holdings |
Arch Capital and NI Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arch Capital and NI Holdings
The main advantage of trading using opposite Arch Capital and NI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, NI Holdings 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 NI Holdings will offset losses from the drop in NI Holdings' long position.Arch Capital vs. Enstar Group Limited | Arch Capital vs. Aegon NV ADR | Arch Capital vs. American International Group | Arch Capital vs. Axa Equitable Holdings |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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