Correlation Between Assured Guaranty and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both Assured Guaranty and Ambac Financial 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 Assured Guaranty and Ambac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Assured Guaranty and Ambac Financial Group, you can compare the effects of market volatilities on Assured Guaranty and Ambac Financial 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 Assured Guaranty with a short position of Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assured Guaranty and Ambac Financial.
Diversification Opportunities for Assured Guaranty and Ambac Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Assured and Ambac is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and Ambac Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambac Financial Group and Assured Guaranty 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 Assured Guaranty are associated (or correlated) with Ambac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambac Financial Group has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and Ambac Financial go up and down completely randomly.
Pair Corralation between Assured Guaranty and Ambac Financial
Considering the 90-day investment horizon Assured Guaranty is expected to generate 0.6 times more return on investment than Ambac Financial. However, Assured Guaranty is 1.68 times less risky than Ambac Financial. It trades about 0.28 of its potential returns per unit of risk. Ambac Financial Group is currently generating about -0.15 per unit of risk. If you would invest 8,590 in Assured Guaranty on October 20, 2024 and sell it today you would earn a total of 583.00 from holding Assured Guaranty or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Assured Guaranty vs. Ambac Financial Group
Performance |
| Timeline |
| Assured Guaranty |
| Ambac Financial Group |
Assured Guaranty and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Assured Guaranty and Ambac Financial
The main advantage of trading using opposite Assured Guaranty and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assured Guaranty position performs unexpectedly, Ambac Financial 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 Ambac Financial will offset losses from the drop in Ambac Financial's long position.| Assured Guaranty vs. AXIS Capital Holdings | Assured Guaranty vs. MBIA Inc | Assured Guaranty vs. Assurant | Assured Guaranty vs. American Financial Group |
| Ambac Financial vs. Employers Holdings | Ambac Financial vs. James River Group | Ambac Financial vs. Assured Guaranty | Ambac Financial vs. ICC Holdings |
Check out your portfolio center.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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