Correlation Between Arch Capital and 00108WAF7

Can any of the company-specific risk be diversified away by investing in both Arch Capital and 00108WAF7 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 00108WAF7 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 AEP TEX INC, you can compare the effects of market volatilities on Arch Capital and 00108WAF7 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 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and 00108WAF7.

Diversification Opportunities for Arch Capital and 00108WAF7

-0.3

Correlation Coefficient

Arch Capital  00108WAF7

Very good diversification

The 3 months correlation between Arch and 00108WAF7 is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC 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 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Arch Capital i.e., Arch Capital and 00108WAF7 go up and down completely randomly.

Pair Corralation between Arch Capital and 00108WAF7

Given the investment horizon of 90 days Arch Capital Group is expected to generate 0.46 times more return on investment than 00108WAF7. However, Arch Capital Group is 2.15 times less risky than 00108WAF7. It trades about 0.12 of its potential returns per unit of risk. AEP TEX INC is currently generating about 0.03 per unit of risk. If you would invest  9,103  in Arch Capital Group on March 14, 2024 and sell it today you would earn a total of  855.00  from holding Arch Capital Group or generate 9.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.52%
Values	Daily Returns

Arch Capital Group  vs.  AEP TEX INC

Arch Capital Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Capital Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Arch Capital may actually be approaching a critical reversion point that can send shares even higher in July 2024.

AEP TEX INC

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 00108WAF7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arch Capital and 00108WAF7

The main advantage of trading using opposite Arch Capital and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, 00108WAF7 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 00108WAF7 will offset losses from the drop in 00108WAF7's long position.

The idea behind Arch Capital Group and AEP TEX INC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.