Correlation Between Arch Capital and Wintrust Financial

Can any of the company-specific risk be diversified away by investing in both Arch Capital and Wintrust 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 Arch Capital and Wintrust Financial 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 Wintrust Financial Corp, you can compare the effects of market volatilities on Arch Capital and Wintrust 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 Arch Capital with a short position of Wintrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Wintrust Financial.

Diversification Opportunities for Arch Capital and Wintrust Financial

0.55

Correlation Coefficient

Arch Capital  Wintrust Financial

Very weak diversification

The 3 months correlation between Arch and Wintrust is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Wintrust Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintrust Financial Corp 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 Wintrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintrust Financial Corp has no effect on the direction of Arch Capital i.e., Arch Capital and Wintrust Financial go up and down completely randomly.

Pair Corralation between Arch Capital and Wintrust Financial

Assuming the 90 days horizon Arch Capital is expected to generate 1.09 times less return on investment than Wintrust Financial. In addition to that, Arch Capital is 5.77 times more volatile than Wintrust Financial Corp. It trades about 0.06 of its total potential returns per unit of risk. Wintrust Financial Corp is currently generating about 0.41 per unit of volatility. If you would invest  2,454  in Wintrust Financial Corp on May 1, 2025 and sell it today you would earn a total of  46.00  from holding Wintrust Financial Corp or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.61%
Values	Daily Returns

Arch Capital Group  vs.  Wintrust Financial Corp

Arch Capital Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Capital Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Arch Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Wintrust Financial Corp

Risk-Adjusted Performance

Very Strong

Over the last 90 days Wintrust Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Wintrust Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Arch Capital and Wintrust Financial

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

The idea behind Arch Capital Group and Wintrust Financial Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.