Correlation Between Ambac Financial and AMERISAFE

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

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

Diversification Opportunities for Ambac Financial and AMERISAFE

0.73

Correlation Coefficient

Ambac Financial  AMERISAFE

Poor diversification

The 3 months correlation between Ambac and AMERISAFE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ambac Financial Group and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE and Ambac Financial 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 Ambac Financial Group 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 Ambac Financial i.e., Ambac Financial and AMERISAFE go up and down completely randomly.

Pair Corralation between Ambac Financial and AMERISAFE

Given the investment horizon of 90 days Ambac Financial is expected to generate 1.55 times less return on investment than AMERISAFE. In addition to that, Ambac Financial is 1.1 times more volatile than AMERISAFE. It trades about 0.09 of its total potential returns per unit of risk. AMERISAFE is currently generating about 0.15 per unit of volatility. If you would invest  4,943  in AMERISAFE on September 2, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Ambac Financial Group  vs.  AMERISAFE

Ambac Financial Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambac Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Ambac Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AMERISAFE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 11 (%) 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 Ambac Financial and AMERISAFE

The main advantage of trading using opposite Ambac Financial and AMERISAFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambac Financial 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 Ambac Financial Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.