Correlation Between AmTrust Financial and Kinsale Capital

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

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

Diversification Opportunities for AmTrust Financial and Kinsale Capital

-0.56

Correlation Coefficient

AmTrust Financial  Kinsale Capital

Excellent diversification

The 3 months correlation between AmTrust and Kinsale is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group and AmTrust Financial 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 AmTrust Financial Services are associated (or correlated) with Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Kinsale Capital go up and down completely randomly.

Pair Corralation between AmTrust Financial and Kinsale Capital

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 1.51 times more return on investment than Kinsale Capital. However, AmTrust Financial is 1.51 times more volatile than Kinsale Capital Group. It trades about 0.04 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about 0.03 per unit of risk. If you would invest  1,189  in AmTrust Financial Services on March 19, 2024 and sell it today you would earn a total of  166.00  from holding AmTrust Financial Services or generate 13.96% return on investment over 90 days.

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

AmTrust Financial Services  vs.  Kinsale Capital Group

AmTrust Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Kinsale Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinsale Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with AmTrust Financial and Kinsale Capital

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

The idea behind AmTrust Financial Services and Kinsale Capital Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.