Correlation Between Employers Holdings and MBIA

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

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

Diversification Opportunities for Employers Holdings and MBIA

-0.28

Correlation Coefficient

Employers Holdings  MBIA

Very good diversification

The 3 months correlation between Employers and MBIA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and MBIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBIA Inc 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 MBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBIA Inc has no effect on the direction of Employers Holdings i.e., Employers Holdings and MBIA go up and down completely randomly.

Pair Corralation between Employers Holdings and MBIA

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.29 times more return on investment than MBIA. However, Employers Holdings is 3.46 times less risky than MBIA. It trades about 0.0 of its potential returns per unit of risk. MBIA Inc is currently generating about -0.07 per unit of risk. If you would invest  5,059  in Employers Holdings on December 28, 2024 and sell it today you would lose (22.00) from holding Employers Holdings or give up 0.43% 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.  MBIA Inc

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.

MBIA Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MBIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Employers Holdings and MBIA

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

The idea behind Employers Holdings and MBIA Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.