Correlation Between Essent and ICC Holdings

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

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

Diversification Opportunities for Essent and ICC Holdings

0.34

Correlation Coefficient

Essent  ICC Holdings

Weak diversification

The 3 months correlation between Essent and ICC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Essent Group and ICC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICC Holdings and Essent 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 Essent Group are associated (or correlated) with ICC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICC Holdings has no effect on the direction of Essent i.e., Essent and ICC Holdings go up and down completely randomly.

Pair Corralation between Essent and ICC Holdings

Given the investment horizon of 90 days Essent Group is expected to generate 1.8 times more return on investment than ICC Holdings. However, Essent is 1.8 times more volatile than ICC Holdings. It trades about 0.12 of its potential returns per unit of risk. ICC Holdings is currently generating about 0.03 per unit of risk. If you would invest  5,382  in Essent Group on December 28, 2024 and sell it today you would earn a total of  469.00  from holding Essent Group or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.33%
Values	Daily Returns

Essent Group  vs.  ICC Holdings

Essent Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essent Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Essent may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ICC Holdings

Risk-Adjusted Performance

Weak

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

Pair Trading with Essent and ICC Holdings

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

The idea behind Essent Group and ICC Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.