Correlation Between Radian and Assured Guaranty
Can any of the company-specific risk be diversified away by investing in both Radian and Assured Guaranty 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 Radian and Assured Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Radian Group and Assured Guaranty, you can compare the effects of market volatilities on Radian and Assured Guaranty 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 Radian with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radian and Assured Guaranty.
Diversification Opportunities for Radian and Assured Guaranty
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Radian and Assured is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Radian Group and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Radian 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 Radian Group are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Radian i.e., Radian and Assured Guaranty go up and down completely randomly.
Pair Corralation between Radian and Assured Guaranty
Assuming the 90 days horizon Radian Group is expected to generate 0.57 times more return on investment than Assured Guaranty. However, Radian Group is 1.75 times less risky than Assured Guaranty. It trades about 0.09 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.04 per unit of risk. If you would invest 1,635 in Radian Group on September 14, 2024 and sell it today you would earn a total of 1,545 from holding Radian Group or generate 94.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Radian Group vs. Assured Guaranty
Performance |
| Timeline |
| Radian Group |
| Assured Guaranty |
Radian and Assured Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Radian and Assured Guaranty
The main advantage of trading using opposite Radian and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radian position performs unexpectedly, Assured Guaranty 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 Assured Guaranty will offset losses from the drop in Assured Guaranty's long position.| Radian vs. First American Financial | Radian vs. MGIC Investment | Radian vs. Lancashire Holdings Limited | Radian vs. Trisura Group |
| Assured Guaranty vs. First American Financial | Assured Guaranty vs. MGIC Investment | Assured Guaranty vs. Lancashire Holdings Limited | Assured Guaranty vs. Trisura 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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