Correlation Between Essent and Tiptree
Can any of the company-specific risk be diversified away by investing in both Essent and Tiptree 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 Essent and Tiptree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essent Group and Tiptree, you can compare the effects of market volatilities on Essent and Tiptree 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 Essent with a short position of Tiptree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essent and Tiptree.
Diversification Opportunities for Essent and Tiptree
Pay attention - limited upside
The 3 months correlation between Essent and Tiptree is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Essent Group and Tiptree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiptree and Essent 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 Essent Group are associated (or correlated) with Tiptree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiptree has no effect on the direction of Essent i.e., Essent and Tiptree go up and down completely randomly.
Pair Corralation between Essent and Tiptree
Given the investment horizon of 90 days Essent Group is expected to under-perform the Tiptree. In addition to that, Essent is 1.55 times more volatile than Tiptree. It trades about -0.07 of its total potential returns per unit of risk. Tiptree is currently generating about 0.3 per unit of volatility. If you would invest 1,965 in Tiptree on August 28, 2024 and sell it today you would earn a total of 230.00 from holding Tiptree or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Essent Group vs. Tiptree
Performance |
| Timeline |
| Essent Group |
| Tiptree |
Essent and Tiptree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essent and Tiptree
The main advantage of trading using opposite Essent and Tiptree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essent position performs unexpectedly, Tiptree 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 Tiptree will offset losses from the drop in Tiptree's long position.The idea behind Essent Group and Tiptree 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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