Correlation Between Ambac Financial and Radian
Can any of the company-specific risk be diversified away by investing in both Ambac Financial and Radian 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 Ambac Financial and Radian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambac Financial Group and Radian Group, you can compare the effects of market volatilities on Ambac Financial and Radian 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 Ambac Financial with a short position of Radian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambac Financial and Radian.
Diversification Opportunities for Ambac Financial and Radian
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ambac and Radian is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ambac Financial Group and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group and Ambac Financial 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 Ambac Financial Group are associated (or correlated) with Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of Ambac Financial i.e., Ambac Financial and Radian go up and down completely randomly.
Pair Corralation between Ambac Financial and Radian
Given the investment horizon of 90 days Ambac Financial is expected to generate 1.15 times less return on investment than Radian. In addition to that, Ambac Financial is 1.35 times more volatile than Radian Group. It trades about 0.01 of its total potential returns per unit of risk. Radian Group is currently generating about 0.02 per unit of volatility. If you would invest 3,347 in Radian Group on November 3, 2024 and sell it today you would earn a total of 55.00 from holding Radian Group or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambac Financial Group vs. Radian Group
Performance |
| Timeline |
| Ambac Financial Group |
| Radian Group |
Ambac Financial and Radian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambac Financial and Radian
The main advantage of trading using opposite Ambac Financial and Radian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambac Financial position performs unexpectedly, Radian 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 Radian will offset losses from the drop in Radian's long position.| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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