Correlation Between Arch Capital and Stewart Information

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

Diversification Opportunities for Arch Capital and Stewart Information

0.38

Correlation Coefficient

Arch Capital  Stewart Information

Weak diversification

The 3 months correlation between Arch and Stewart is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Stewart Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stewart Information 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 Stewart Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stewart Information has no effect on the direction of Arch Capital i.e., Arch Capital and Stewart Information go up and down completely randomly.

Pair Corralation between Arch Capital and Stewart Information

Given the investment horizon of 90 days Arch Capital Group is expected to under-perform the Stewart Information. But the stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 1.42 times less risky than Stewart Information. The stock trades about -0.02 of its potential returns per unit of risk. The Stewart Information Services is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,803  in Stewart Information Services on July 18, 2025 and sell it today you would earn a total of  1,082  from holding Stewart Information Services or generate 18.65% return on investment over 90 days.

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

Arch Capital Group  vs.  Stewart Information Services

Arch Capital Group

Risk-Adjusted Performance

Weak

Over the last 90 days Arch Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Arch Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Stewart Information

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stewart Information Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Stewart Information exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arch Capital and Stewart Information

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

The idea behind Arch Capital Group and Stewart Information 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.