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 Ltd 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

-0.14

Correlation Coefficient

Enstar Group  Fundamental Global

Good diversification

The 3 months correlation between Enstar and Fundamental is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Ltd 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 Ltd 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 13.28 times less return on investment than Fundamental Global. But when comparing it to its historical volatility, Enstar Group Ltd is 2.83 times less risky than Fundamental Global. It trades about 0.03 of its potential returns per unit of risk. Fundamental Global is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,690  in Fundamental Global on October 11, 2024 and sell it today you would earn a total of  174.00  from holding Fundamental Global or generate 10.3% return on investment over 90 days.

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

Enstar Group Ltd  vs.  Fundamental Global

Enstar Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enstar Group Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Enstar Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Fundamental Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fundamental Global reported solid returns over the last few months and may actually be approaching a breakup point.

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 Ltd 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.