Correlation Between Enstar Group and Fundamental Global

Can any of the company-specific risk be diversified away by investing in both Enstar Group and Fundamental Global 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 Fundamental Global 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 Fundamental Global, you can compare the effects of market volatilities on Enstar Group and Fundamental Global 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 Fundamental Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enstar Group and Fundamental Global.

Diversification Opportunities for Enstar Group and Fundamental Global

-0.37

Correlation Coefficient

Enstar Group  Fundamental Global

Very good diversification

The 3 months correlation between Enstar and Fundamental is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Limited and Fundamental Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Global 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 Fundamental Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Global has no effect on the direction of Enstar Group i.e., Enstar Group and Fundamental Global go up and down completely randomly.

Pair Corralation between Enstar Group and Fundamental Global

Assuming the 90 days horizon Enstar Group is expected to generate 2.17 times less return on investment than Fundamental Global. But when comparing it to its historical volatility, Enstar Group Limited is 2.93 times less risky than Fundamental Global. It trades about 0.05 of its potential returns per unit of risk. Fundamental Global is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,480  in Fundamental Global on October 8, 2024 and sell it today you would earn a total of  65.00  from holding Fundamental Global or generate 4.39% return on investment over 90 days.

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

Enstar Group Limited  vs.  Fundamental Global

Enstar Group Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enstar Group Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enstar Group is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Fundamental Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fundamental Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enstar Group and Fundamental Global

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

The idea behind Enstar Group Limited and Fundamental Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.