Correlation Between Arch Capital and Oncternal Therapeutics

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

Diversification Opportunities for Arch Capital and Oncternal Therapeutics

-0.4

Correlation Coefficient

Arch Capital  Oncternal Therapeutics

Very good diversification

The 3 months correlation between Arch and Oncternal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Oncternal Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncternal Therapeutics 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 Oncternal Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncternal Therapeutics has no effect on the direction of Arch Capital i.e., Arch Capital and Oncternal Therapeutics go up and down completely randomly.

Pair Corralation between Arch Capital and Oncternal Therapeutics

Given the investment horizon of 90 days Arch Capital Group is expected to generate 0.46 times more return on investment than Oncternal Therapeutics. However, Arch Capital Group is 2.16 times less risky than Oncternal Therapeutics. It trades about 0.22 of its potential returns per unit of risk. Oncternal Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  9,385  in Arch Capital Group on February 21, 2024 and sell it today you would earn a total of  632.00  from holding Arch Capital Group or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Arch Capital Group  vs.  Oncternal Therapeutics

Arch Capital Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Capital Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Arch Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Oncternal Therapeutics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Oncternal Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Oncternal Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arch Capital and Oncternal Therapeutics

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

The idea behind Arch Capital Group and Oncternal Therapeutics 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..