Correlation Between AMERISAFE and Essent
Can any of the company-specific risk be diversified away by investing in both AMERISAFE 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 AMERISAFE and Essent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMERISAFE and Essent Group, you can compare the effects of market volatilities on AMERISAFE 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 AMERISAFE with a short position of Essent. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERISAFE and Essent.
Diversification Opportunities for AMERISAFE and Essent
Pay attention - limited upside
The 3 months correlation between AMERISAFE and Essent is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding AMERISAFE and Essent Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essent Group and AMERISAFE 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 AMERISAFE 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 AMERISAFE i.e., AMERISAFE and Essent go up and down completely randomly.
Pair Corralation between AMERISAFE and Essent
Given the investment horizon of 90 days AMERISAFE is expected to generate 0.68 times more return on investment than Essent. However, AMERISAFE is 1.47 times less risky than Essent. It trades about 0.17 of its potential returns per unit of risk. Essent Group is currently generating about -0.07 per unit of risk. If you would invest 5,489 in AMERISAFE on August 28, 2024 and sell it today you would earn a total of 371.00 from holding AMERISAFE or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMERISAFE vs. Essent Group
Performance |
| Timeline |
| AMERISAFE |
| Essent Group |
AMERISAFE and Essent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMERISAFE and Essent
The main advantage of trading using opposite AMERISAFE and Essent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMERISAFE 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.| AMERISAFE vs. Assured Guaranty | AMERISAFE vs. MBIA Inc | AMERISAFE vs. Enact Holdings | AMERISAFE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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