Correlation Between Fidelity National and Essent

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

Diversification Opportunities for Fidelity National and Essent

0.44

Correlation Coefficient

Fidelity National  Essent

Very weak diversification

The 3 months correlation between Fidelity and Essent is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Financial and Essent Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essent Group 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 Essent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essent Group has no effect on the direction of Fidelity National i.e., Fidelity National and Essent go up and down completely randomly.

Pair Corralation between Fidelity National and Essent

Considering the 90-day investment horizon Fidelity National Financial is expected to generate 0.98 times more return on investment than Essent. However, Fidelity National Financial is 1.02 times less risky than Essent. It trades about 0.05 of its potential returns per unit of risk. Essent Group is currently generating about 0.02 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	Weak
Accuracy	100.0%
Values	Daily Returns

Fidelity National Financial  vs.  Essent Group

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.

Essent Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essent Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fidelity National and Essent

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

The idea behind Fidelity National Financial and Essent Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.