Correlation Between Assurant and Assured Guaranty

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

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

Diversification Opportunities for Assurant and Assured Guaranty

0.33

Correlation Coefficient

Assurant  Assured Guaranty

Weak diversification

The 3 months correlation between Assurant and Assured is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Assurant and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Assurant 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 Assurant are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Assurant i.e., Assurant and Assured Guaranty go up and down completely randomly.

Pair Corralation between Assurant and Assured Guaranty

Considering the 90-day investment horizon Assurant is expected to under-perform the Assured Guaranty. But the stock apears to be less risky and, when comparing its historical volatility, Assurant is 1.08 times less risky than Assured Guaranty. The stock trades about -0.02 of its potential returns per unit of risk. The Assured Guaranty is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,902  in Assured Guaranty on December 29, 2024 and sell it today you would lose (20.00) from holding Assured Guaranty or give up 0.22% of portfolio value over 90 days.

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

Assurant  vs.  Assured Guaranty

Assurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assurant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Assurant is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Assured Guaranty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Assurant and Assured Guaranty

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

The idea behind Assurant and Assured Guaranty 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.