Correlation Between James River and MBIA

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

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

Diversification Opportunities for James River and MBIA

0.7

Correlation Coefficient

James River  MBIA

Poor diversification

The 3 months correlation between James and MBIA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding James River Group and MBIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBIA Inc and James River 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 James River Group are associated (or correlated) with MBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBIA Inc has no effect on the direction of James River i.e., James River and MBIA go up and down completely randomly.

Pair Corralation between James River and MBIA

Given the investment horizon of 90 days James River Group is expected to generate 1.06 times more return on investment than MBIA. However, James River is 1.06 times more volatile than MBIA Inc. It trades about -0.01 of its potential returns per unit of risk. MBIA Inc is currently generating about -0.05 per unit of risk. If you would invest  483.00  in James River Group on December 27, 2024 and sell it today you would lose (47.00) from holding James River Group or give up 9.73% of portfolio value over 90 days.

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

James River Group  vs.  MBIA Inc

James River Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days James River Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, James River is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

MBIA Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MBIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with James River and MBIA

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

The idea behind James River Group and MBIA Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.