Correlation Between Ambac Financial and AXIS Capital

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

Diversification Opportunities for Ambac Financial and AXIS Capital

0.23

Correlation Coefficient

Ambac Financial  AXIS Capital

Modest diversification

The 3 months correlation between Ambac and AXIS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ambac Financial Group and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital Holdings 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of Ambac Financial i.e., Ambac Financial and AXIS Capital go up and down completely randomly.

Pair Corralation between Ambac Financial and AXIS Capital

Given the investment horizon of 90 days Ambac Financial Group is expected to generate 2.97 times more return on investment than AXIS Capital. However, Ambac Financial is 2.97 times more volatile than AXIS Capital Holdings. It trades about 0.09 of its potential returns per unit of risk. AXIS Capital Holdings is currently generating about 0.12 per unit of risk. If you would invest  1,153  in Ambac Financial Group on September 2, 2024 and sell it today you would earn a total of  131.00  from holding Ambac Financial Group or generate 11.36% return on investment over 90 days.

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

Ambac Financial Group  vs.  AXIS Capital Holdings

Ambac Financial Group

Risk-Adjusted Performance

6 of 100

Modest

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.

AXIS Capital Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AXIS Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ambac Financial and AXIS Capital

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

The idea behind Ambac Financial Group and AXIS Capital Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.