Correlation Between Assured Guaranty and Lancashire Holdings
Can any of the company-specific risk be diversified away by investing in both Assured Guaranty and Lancashire Holdings 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 Lancashire Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Assured Guaranty and Lancashire Holdings, you can compare the effects of market volatilities on Assured Guaranty and Lancashire Holdings 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 Lancashire Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assured Guaranty and Lancashire Holdings.
Diversification Opportunities for Assured Guaranty and Lancashire Holdings
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Assured and Lancashire is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings 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 Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and Lancashire Holdings go up and down completely randomly.
Pair Corralation between Assured Guaranty and Lancashire Holdings
Considering the 90-day investment horizon Assured Guaranty is expected to generate 0.48 times more return on investment than Lancashire Holdings. However, Assured Guaranty is 2.07 times less risky than Lancashire Holdings. It trades about 0.12 of its potential returns per unit of risk. Lancashire Holdings is currently generating about 0.01 per unit of risk. If you would invest 8,028 in Assured Guaranty on October 5, 2024 and sell it today you would earn a total of 1,001 from holding Assured Guaranty or generate 12.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 96.77% |
Values | Daily Returns |
Assured Guaranty vs. Lancashire Holdings
Performance |
Timeline |
Assured Guaranty |
Lancashire Holdings |
Assured Guaranty and Lancashire Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Assured Guaranty and Lancashire Holdings
The main advantage of trading using opposite Assured Guaranty and Lancashire Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assured Guaranty position performs unexpectedly, Lancashire Holdings 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 Lancashire Holdings will offset losses from the drop in Lancashire Holdings' long position.Assured Guaranty vs. AXIS Capital Holdings | ||
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Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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