Correlation Between PMI and Assured Guaranty

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

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

Diversification Opportunities for PMI and Assured Guaranty

-0.08

Correlation Coefficient

PMI  Assured Guaranty

Good diversification

The 3 months correlation between PMI and Assured is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding The PMI Group and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and PMI 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 The PMI Group 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 PMI i.e., PMI and Assured Guaranty go up and down completely randomly.

Pair Corralation between PMI and Assured Guaranty

Given the investment horizon of 90 days The PMI Group is expected to under-perform the Assured Guaranty. In addition to that, PMI is 15.92 times more volatile than Assured Guaranty. It trades about -0.22 of its total potential returns per unit of risk. Assured Guaranty is currently generating about -0.15 per unit of volatility. If you would invest  9,341  in Assured Guaranty on September 28, 2024 and sell it today you would lose (377.00) from holding Assured Guaranty or give up 4.04% of portfolio value over 90 days.

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

The PMI Group  vs.  Assured Guaranty

PMI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The PMI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Assured Guaranty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Assured Guaranty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PMI and Assured Guaranty

The main advantage of trading using opposite PMI and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PMI 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 The PMI Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.