Correlation Between First American and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both First American 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 First American and Ambac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Financial and Ambac Financial Group, you can compare the effects of market volatilities on First American 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 First American with a short position of Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Ambac Financial.
Diversification Opportunities for First American and Ambac Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Ambac is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First American Financial 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 First American 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 First American Financial 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 First American i.e., First American and Ambac Financial go up and down completely randomly.
Pair Corralation between First American and Ambac Financial
Assuming the 90 days horizon First American Financial is expected to under-perform the Ambac Financial. But the stock apears to be less risky and, when comparing its historical volatility, First American Financial is 1.47 times less risky than Ambac Financial. The stock trades about -0.18 of its potential returns per unit of risk. The Ambac Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,140 in Ambac Financial Group on September 22, 2024 and sell it today you would earn a total of 20.00 from holding Ambac Financial Group or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American Financial vs. Ambac Financial Group
Performance |
| Timeline |
| First American Financial |
| Ambac Financial Group |
First American and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Ambac Financial
The main advantage of trading using opposite First American and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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.| First American vs. Charoen Pokphand Foods | First American vs. Clean Energy Fuels | First American vs. Performance Food Group | First American vs. JJ SNACK FOODS |
| Ambac Financial vs. WisdomTree Investments | Ambac Financial vs. SLR Investment Corp | Ambac Financial vs. EAT WELL INVESTMENT | Ambac Financial vs. New Residential 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Global Correlations Find global opportunities by holding instruments from different markets |