Correlation Between James River and Radian
Can any of the company-specific risk be diversified away by investing in both James River 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 James River and Radian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between James River Group and Radian Group, you can compare the effects of market volatilities on James River 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 James River with a short position of Radian. Check out your portfolio center. Please also check ongoing floating volatility patterns of James River and Radian.
Diversification Opportunities for James River and Radian
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between James and Radian is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding James River Group and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group and James River 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 James River 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 James River i.e., James River and Radian go up and down completely randomly.
Pair Corralation between James River and Radian
Given the investment horizon of 90 days James River Group is expected to under-perform the Radian. In addition to that, James River is 2.17 times more volatile than Radian Group. It trades about -0.08 of its total potential returns per unit of risk. Radian Group is currently generating about 0.1 per unit of volatility. If you would invest 1,714 in Radian Group on August 27, 2024 and sell it today you would earn a total of 1,782 from holding Radian Group or generate 103.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
James River Group vs. Radian Group
Performance |
| Timeline |
| James River Group |
| Radian Group |
James River and Radian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with James River and Radian
The main advantage of trading using opposite James River and Radian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James River 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.| James River vs. Employers Holdings | James River vs. Investors Title | James River vs. AMERISAFE | James River vs. Essent Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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