Correlation Between First American and Radian
Can any of the company-specific risk be diversified away by investing in both First American 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 First American and Radian 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 Radian Group, you can compare the effects of market volatilities on First American 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 First American with a short position of Radian. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Radian.
Diversification Opportunities for First American and Radian
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Radian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First American Financial and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian 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 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 First American i.e., First American and Radian go up and down completely randomly.
Pair Corralation between First American and Radian
Assuming the 90 days horizon First American is expected to generate 1.98 times less return on investment than Radian. But when comparing it to its historical volatility, First American Financial is 1.05 times less risky than Radian. It trades about 0.05 of its potential returns per unit of risk. Radian Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. 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 | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
First American Financial vs. Radian Group
Performance |
| Timeline |
| First American Financial |
| Radian Group |
First American and Radian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Radian
The main advantage of trading using opposite First American and Radian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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.| First American vs. FARO Technologies | First American vs. Uber Technologies | First American vs. Jacquet Metal Service | First American vs. ADRIATIC METALS LS 013355 |
| Radian vs. First American Financial | Radian vs. MGIC Investment | Radian vs. Lancashire Holdings Limited | Radian 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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