Correlation Between ICC Holdings and Essent

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

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

Diversification Opportunities for ICC Holdings and Essent

0.34

Correlation Coefficient

ICC Holdings  Essent

Weak diversification

The 3 months correlation between ICC and Essent is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ICC Holdings and Essent Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essent Group and ICC Holdings 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 ICC Holdings 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 ICC Holdings i.e., ICC Holdings and Essent go up and down completely randomly.

Pair Corralation between ICC Holdings and Essent

Given the investment horizon of 90 days ICC Holdings is expected to generate 7.57 times less return on investment than Essent. But when comparing it to its historical volatility, ICC Holdings is 1.8 times less risky than Essent. It trades about 0.03 of its potential returns per unit of risk. Essent Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. 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

ICC Holdings  vs.  Essent Group

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.

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.

Pair Trading with ICC Holdings and Essent

The main advantage of trading using opposite ICC Holdings and Essent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICC Holdings 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 ICC Holdings 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.