Correlation Between Fidelity National and Assured Guaranty

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

Diversification Opportunities for Fidelity National and Assured Guaranty

0.22

Correlation Coefficient

Fidelity National  Assured Guaranty

Modest diversification

The 3 months correlation between Fidelity and Assured is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Financial and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty 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 Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Fidelity National i.e., Fidelity National and Assured Guaranty go up and down completely randomly.

Pair Corralation between Fidelity National and Assured Guaranty

Considering the 90-day investment horizon Fidelity National Financial is expected to generate 0.88 times more return on investment than Assured Guaranty. However, Fidelity National Financial is 1.13 times less risky than Assured Guaranty. It trades about 0.05 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.03 per unit of risk. If you would invest  4,796  in Fidelity National Financial on October 2, 2024 and sell it today you would earn a total of  815.50  from holding Fidelity National Financial or generate 17.0% 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.  Assured Guaranty

Fidelity National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Assured Guaranty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Assured Guaranty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity National and Assured Guaranty

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

The idea behind Fidelity National Financial and Assured Guaranty 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.