Correlation Between Employers Holdings and Assured Guaranty

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

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

Diversification Opportunities for Employers Holdings and Assured Guaranty

-0.03

Correlation Coefficient

Employers Holdings  Assured Guaranty

Good diversification

The 3 months correlation between Employers and Assured is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty 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 Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Employers Holdings i.e., Employers Holdings and Assured Guaranty go up and down completely randomly.

Pair Corralation between Employers Holdings and Assured Guaranty

Considering the 90-day investment horizon Employers Holdings is expected to under-perform the Assured Guaranty. But the stock apears to be less risky and, when comparing its historical volatility, Employers Holdings is 1.27 times less risky than Assured Guaranty. The stock trades about 0.0 of its potential returns per unit of risk. The Assured Guaranty is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,902  in Assured Guaranty on December 29, 2024 and sell it today you would lose (20.00) from holding Assured Guaranty or give up 0.22% of portfolio value over 90 days.

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

Employers Holdings  vs.  Assured Guaranty

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.

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Assured Guaranty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Employers Holdings and Assured Guaranty

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

The idea behind Employers Holdings and Assured Guaranty 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.