Correlation Between Assured Guaranty and Trupanion

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

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

Diversification Opportunities for Assured Guaranty and Trupanion

0.66

Correlation Coefficient

Assured Guaranty  Trupanion

Poor diversification

The 3 months correlation between Assured and Trupanion is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion and Assured Guaranty 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 Assured Guaranty are associated (or correlated) with Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and Trupanion go up and down completely randomly.

Pair Corralation between Assured Guaranty and Trupanion

Assuming the 90 days horizon Assured Guaranty is expected to generate 0.87 times more return on investment than Trupanion. However, Assured Guaranty is 1.15 times less risky than Trupanion. It trades about 0.02 of its potential returns per unit of risk. Trupanion is currently generating about -0.11 per unit of risk. If you would invest  8,168  in Assured Guaranty on December 29, 2024 and sell it today you would earn a total of  32.00  from holding Assured Guaranty or generate 0.39% return on investment over 90 days.

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

Assured Guaranty  vs.  Trupanion

Assured Guaranty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Assured Guaranty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Trupanion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trupanion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Assured Guaranty and Trupanion

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

The idea behind Assured Guaranty and Trupanion 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.