Correlation Between Radian and Assured Guaranty

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

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

Diversification Opportunities for Radian and Assured Guaranty

0.83

Correlation Coefficient

Radian  Assured Guaranty

Very poor diversification

The 3 months correlation between Radian and Assured is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Radian Group and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Radian 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 Radian 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 Radian i.e., Radian and Assured Guaranty go up and down completely randomly.

Pair Corralation between Radian and Assured Guaranty

Assuming the 90 days horizon Radian Group is expected to generate 0.63 times more return on investment than Assured Guaranty. However, Radian Group is 1.59 times less risky than Assured Guaranty. It trades about 0.0 of its potential returns per unit of risk. Assured Guaranty is currently generating about -0.06 per unit of risk. If you would invest  3,080  in Radian Group on December 28, 2024 and sell it today you would lose (20.00) from holding Radian Group or give up 0.65% of portfolio value over 90 days.

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

Radian Group  vs.  Assured Guaranty

Radian Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radian Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Radian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Assured Guaranty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Assured Guaranty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Radian and Assured Guaranty

The main advantage of trading using opposite Radian and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radian 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 Radian 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.