Correlation Between AMERISAFE and Enstar Group

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

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

Diversification Opportunities for AMERISAFE and Enstar Group

0.64

Correlation Coefficient

AMERISAFE  Enstar Group

Poor diversification

The 3 months correlation between AMERISAFE and Enstar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding AMERISAFE and Enstar Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enstar Group Limited and AMERISAFE 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 AMERISAFE are associated (or correlated) with Enstar Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enstar Group Limited has no effect on the direction of AMERISAFE i.e., AMERISAFE and Enstar Group go up and down completely randomly.

Pair Corralation between AMERISAFE and Enstar Group

Given the investment horizon of 90 days AMERISAFE is expected to generate 5.31 times more return on investment than Enstar Group. However, AMERISAFE is 5.31 times more volatile than Enstar Group Limited. It trades about 0.14 of its potential returns per unit of risk. Enstar Group Limited is currently generating about -0.01 per unit of risk. If you would invest  4,974  in AMERISAFE on August 30, 2024 and sell it today you would earn a total of  901.00  from holding AMERISAFE or generate 18.11% return on investment over 90 days.

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

AMERISAFE  vs.  Enstar Group Limited

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.

Enstar Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enstar Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Enstar Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AMERISAFE and Enstar Group

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

The idea behind AMERISAFE and Enstar Group Limited 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.