Correlation Between Fidelity National and Enact Holdings

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

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

Diversification Opportunities for Fidelity National and Enact Holdings

0.31

Correlation Coefficient

Fidelity National  Enact Holdings

Weak diversification

The 3 months correlation between Fidelity and Enact is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Financial and Enact Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enact Holdings and Fidelity National 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 Fidelity National Financial are associated (or correlated) with Enact Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enact Holdings has no effect on the direction of Fidelity National i.e., Fidelity National and Enact Holdings go up and down completely randomly.

Pair Corralation between Fidelity National and Enact Holdings

Considering the 90-day investment horizon Fidelity National Financial is expected to generate 0.95 times more return on investment than Enact Holdings. However, Fidelity National Financial is 1.05 times less risky than Enact Holdings. It trades about 0.03 of its potential returns per unit of risk. Enact Holdings is currently generating about -0.03 per unit of risk. If you would invest  5,886  in Fidelity National Financial on September 12, 2024 and sell it today you would earn a total of  133.00  from holding Fidelity National Financial or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fidelity National Financial  vs.  Enact Holdings

Fidelity National

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Enact Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enact Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Enact Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity National and Enact Holdings

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

The idea behind Fidelity National Financial and Enact 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.