Correlation Between AMERISAFE and James River

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

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

Diversification Opportunities for AMERISAFE and James River

-0.61

Correlation Coefficient

AMERISAFE  James River

Excellent diversification

The 3 months correlation between AMERISAFE and James is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AMERISAFE and James River Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James River Group and AMERISAFE 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 AMERISAFE are associated (or correlated) with James River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James River Group has no effect on the direction of AMERISAFE i.e., AMERISAFE and James River go up and down completely randomly.

Pair Corralation between AMERISAFE and James River

Given the investment horizon of 90 days AMERISAFE is expected to generate 0.31 times more return on investment than James River. However, AMERISAFE is 3.19 times less risky than James River. It trades about 0.17 of its potential returns per unit of risk. James River Group is currently generating about -0.26 per unit of risk. If you would invest  5,498  in AMERISAFE on August 26, 2024 and sell it today you would earn a total of  371.00  from holding AMERISAFE or generate 6.75% return on investment over 90 days.

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

AMERISAFE  vs.  James River Group

AMERISAFE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, AMERISAFE reported solid returns over the last few months and may actually be approaching a breakup point.

James River Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James River Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with AMERISAFE and James River

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

The idea behind AMERISAFE and James River 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.