Correlation Between AXIS Capital and Ambac Financial

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

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

Diversification Opportunities for AXIS Capital and Ambac Financial

0.23

Correlation Coefficient

AXIS Capital  Ambac Financial

Modest diversification

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

Pair Corralation between AXIS Capital and Ambac Financial

Considering the 90-day investment horizon AXIS Capital Holdings is expected to generate 1.19 times more return on investment than Ambac Financial. However, AXIS Capital is 1.19 times more volatile than Ambac Financial Group. It trades about 0.14 of its potential returns per unit of risk. Ambac Financial Group is currently generating about 0.07 per unit of risk. If you would invest  9,081  in AXIS Capital Holdings on November 28, 2024 and sell it today you would earn a total of  417.00  from holding AXIS Capital Holdings or generate 4.59% return on investment over 90 days.

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

AXIS Capital Holdings  vs.  Ambac Financial Group

AXIS Capital Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AXIS Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with AXIS Capital and Ambac Financial

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

The idea behind AXIS Capital Holdings and Ambac Financial 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.