Correlation Between AXIS Capital and Arch Capital

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

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

Diversification Opportunities for AXIS Capital and Arch Capital

0.43

Correlation Coefficient

AXIS Capital  Arch Capital

Very weak diversification

The 3 months correlation between AXIS and Arch is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AXIS Capital Holdings and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and AXIS 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 AXIS Capital Holdings are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of AXIS Capital i.e., AXIS Capital and Arch Capital go up and down completely randomly.

Pair Corralation between AXIS Capital and Arch Capital

Considering the 90-day investment horizon AXIS Capital Holdings is expected to generate 0.97 times more return on investment than Arch Capital. However, AXIS Capital Holdings is 1.03 times less risky than Arch Capital. It trades about 0.07 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.01 per unit of risk. If you would invest  9,155  in AXIS Capital Holdings on April 20, 2025 and sell it today you would earn a total of  556.00  from holding AXIS Capital Holdings or generate 6.07% return on investment over 90 days.

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

AXIS Capital Holdings  vs.  Arch Capital Group

AXIS Capital Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, AXIS Capital may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Arch Capital Group

Risk-Adjusted Performance

Very 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.

Pair Trading with AXIS Capital and Arch Capital

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

The idea behind AXIS Capital Holdings and Arch 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.