Correlation Between Employers Holdings and Enact Holdings

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

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

Diversification Opportunities for Employers Holdings and Enact Holdings

0.26

Correlation Coefficient

Employers Holdings  Enact Holdings

Modest diversification

The 3 months correlation between Employers and Enact is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and Enact Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enact Holdings and Employers Holdings 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 Employers Holdings are associated (or correlated) with Enact Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enact Holdings has no effect on the direction of Employers Holdings i.e., Employers Holdings and Enact Holdings go up and down completely randomly.

Pair Corralation between Employers Holdings and Enact Holdings

Considering the 90-day investment horizon Employers Holdings is expected to under-perform the Enact Holdings. In addition to that, Employers Holdings is 1.16 times more volatile than Enact Holdings. It trades about 0.0 of its total potential returns per unit of risk. Enact Holdings is currently generating about 0.14 per unit of volatility. If you would invest  3,221  in Enact Holdings on December 29, 2024 and sell it today you would earn a total of  282.00  from holding Enact Holdings or generate 8.76% return on investment over 90 days.

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

Employers Holdings  vs.  Enact Holdings

Employers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Employers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Employers Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Enact Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enact Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Enact Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Employers Holdings and Enact Holdings

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

The idea behind Employers Holdings and Enact 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..