Correlation Between Ryan Specialty and Essent

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

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

Diversification Opportunities for Ryan Specialty and Essent

0.24

Correlation Coefficient

Ryan Specialty  Essent

Modest diversification

The 3 months correlation between Ryan and Essent is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ryan Specialty Group and Essent Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essent Group and Ryan Specialty 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 Ryan Specialty Group 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 Ryan Specialty i.e., Ryan Specialty and Essent go up and down completely randomly.

Pair Corralation between Ryan Specialty and Essent

Given the investment horizon of 90 days Ryan Specialty Group is expected to generate 1.18 times more return on investment than Essent. However, Ryan Specialty is 1.18 times more volatile than Essent Group. It trades about 0.11 of its potential returns per unit of risk. Essent Group is currently generating about 0.02 per unit of risk. If you would invest  4,217  in Ryan Specialty Group on October 2, 2024 and sell it today you would earn a total of  2,184  from holding Ryan Specialty Group or generate 51.8% return on investment over 90 days.

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

Ryan Specialty Group  vs.  Essent Group

Ryan Specialty Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ryan Specialty Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Ryan Specialty and Essent

The main advantage of trading using opposite Ryan Specialty and Essent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryan Specialty 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 Ryan Specialty Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.