Correlation Between Enstar Group and Global Indemnity

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

By analyzing existing cross correlation between Enstar Group Limited and Global Indemnity PLC, you can compare the effects of market volatilities on Enstar Group and Global Indemnity 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 Enstar Group with a short position of Global Indemnity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enstar Group and Global Indemnity.

Diversification Opportunities for Enstar Group and Global Indemnity

-0.15

Correlation Coefficient

Enstar Group  Global Indemnity

Good diversification

The 3 months correlation between Enstar and Global is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Limited and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC and Enstar Group 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 Enstar Group Limited are associated (or correlated) with Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of Enstar Group i.e., Enstar Group and Global Indemnity go up and down completely randomly.

Pair Corralation between Enstar Group and Global Indemnity

Given the investment horizon of 90 days Enstar Group Limited is expected to generate 0.1 times more return on investment than Global Indemnity. However, Enstar Group Limited is 9.56 times less risky than Global Indemnity. It trades about 0.24 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about -0.03 per unit of risk. If you would invest  32,234  in Enstar Group Limited on December 29, 2024 and sell it today you would earn a total of  1,041  from holding Enstar Group Limited or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Enstar Group Limited  vs.  Global Indemnity PLC

Enstar Group Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enstar Group Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Enstar Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Global Indemnity PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Indemnity PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Global Indemnity is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Enstar Group and Global Indemnity

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

The idea behind Enstar Group Limited and Global Indemnity PLC 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.