Correlation Between Loews Corp and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both Loews Corp 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 Loews Corp and Ambac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loews Corp and Ambac Financial Group, you can compare the effects of market volatilities on Loews Corp 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 Loews Corp with a short position of Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loews Corp and Ambac Financial.
Diversification Opportunities for Loews Corp and Ambac Financial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Loews and Ambac is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp 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 Loews Corp 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 Loews Corp 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 Loews Corp i.e., Loews Corp and Ambac Financial go up and down completely randomly.
Pair Corralation between Loews Corp and Ambac Financial
Taking into account the 90-day investment horizon Loews Corp is expected to generate 1.87 times less return on investment than Ambac Financial. But when comparing it to its historical volatility, Loews Corp is 1.74 times less risky than Ambac Financial. It trades about 0.18 of its potential returns per unit of risk. Ambac Financial Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,144 in Ambac Financial Group on August 28, 2024 and sell it today you would earn a total of 138.00 from holding Ambac Financial Group or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loews Corp vs. Ambac Financial Group
Performance |
| Timeline |
| Loews Corp |
| Ambac Financial Group |
Loews Corp and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loews Corp and Ambac Financial
The main advantage of trading using opposite Loews Corp and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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.| Loews Corp vs. Horace Mann Educators | Loews Corp vs. Global Indemnity PLC | Loews Corp vs. Selective Insurance Group | Loews Corp vs. Kemper |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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