Correlation Between Radian and AMERISAFE
Can any of the company-specific risk be diversified away by investing in both Radian and AMERISAFE 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 AMERISAFE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Radian Group and AMERISAFE, you can compare the effects of market volatilities on Radian and AMERISAFE 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 AMERISAFE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radian and AMERISAFE.
Diversification Opportunities for Radian and AMERISAFE
Very good diversification
The 3 months correlation between Radian and AMERISAFE is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Radian Group and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE 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 AMERISAFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERISAFE has no effect on the direction of Radian i.e., Radian and AMERISAFE go up and down completely randomly.
Pair Corralation between Radian and AMERISAFE
Considering the 90-day investment horizon Radian is expected to generate 2.3 times less return on investment than AMERISAFE. In addition to that, Radian is 1.06 times more volatile than AMERISAFE. It trades about 0.06 of its total potential returns per unit of risk. AMERISAFE is currently generating about 0.15 per unit of volatility. If you would invest 4,325 in AMERISAFE on August 24, 2024 and sell it today you would earn a total of 1,482 from holding AMERISAFE or generate 34.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Radian Group vs. AMERISAFE
Performance |
| Timeline |
| Radian Group |
| AMERISAFE |
Radian and AMERISAFE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Radian and AMERISAFE
The main advantage of trading using opposite Radian and AMERISAFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radian position performs unexpectedly, AMERISAFE 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 AMERISAFE will offset losses from the drop in AMERISAFE's long position.The idea behind Radian Group and AMERISAFE 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.| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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