Correlation Between Assured Guaranty and AMERISAFE

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

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

Diversification Opportunities for Assured Guaranty and AMERISAFE

0.89

Correlation Coefficient

Assured Guaranty  AMERISAFE

Very poor diversification

The 3 months correlation between Assured and AMERISAFE is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE and Assured Guaranty 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 Assured Guaranty are associated (or correlated) with AMERISAFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERISAFE has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and AMERISAFE go up and down completely randomly.

Pair Corralation between Assured Guaranty and AMERISAFE

Considering the 90-day investment horizon Assured Guaranty is expected to generate 1.18 times less return on investment than AMERISAFE. But when comparing it to its historical volatility, Assured Guaranty is 1.13 times less risky than AMERISAFE. It trades about 0.15 of its potential returns per unit of risk. AMERISAFE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,943  in AMERISAFE on September 1, 2024 and sell it today you would earn a total of  959.00  from holding AMERISAFE or generate 19.4% return on investment over 90 days.

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

Assured Guaranty  vs.  AMERISAFE

Assured Guaranty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Assured Guaranty displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Assured Guaranty and AMERISAFE

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

The idea behind Assured Guaranty and AMERISAFE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.