Correlation Between Ambac Financial and Radian

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

Diversification Opportunities for Ambac Financial and Radian

0.18

Correlation Coefficient

Ambac Financial  Radian

Average diversification

The 3 months correlation between Ambac and Radian is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ambac Financial Group and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group 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 Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of Ambac Financial i.e., Ambac Financial and Radian go up and down completely randomly.

Pair Corralation between Ambac Financial and Radian

Given the investment horizon of 90 days Ambac Financial Group is expected to under-perform the Radian. In addition to that, Ambac Financial is 1.96 times more volatile than Radian Group. It trades about -0.2 of its total potential returns per unit of risk. Radian Group is currently generating about 0.07 per unit of volatility. If you would invest  3,148  in Radian Group on December 28, 2024 and sell it today you would earn a total of  169.00  from holding Radian Group or generate 5.37% return on investment over 90 days.

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

Ambac Financial Group  vs.  Radian Group

Ambac Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ambac Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Radian Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radian Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radian is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ambac Financial and Radian

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

The idea behind Ambac Financial Group and Radian Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.