Correlation Between EMPLOYERS HLDGS and Ambac Financial
Can any of the company-specific risk be diversified away by investing in both EMPLOYERS HLDGS 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 EMPLOYERS HLDGS and Ambac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMPLOYERS HLDGS DL and Ambac Financial Group, you can compare the effects of market volatilities on EMPLOYERS HLDGS 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 EMPLOYERS HLDGS with a short position of Ambac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMPLOYERS HLDGS and Ambac Financial.
Diversification Opportunities for EMPLOYERS HLDGS and Ambac Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EMPLOYERS and Ambac is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS 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 EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS i.e., EMPLOYERS HLDGS and Ambac Financial go up and down completely randomly.
Pair Corralation between EMPLOYERS HLDGS and Ambac Financial
Assuming the 90 days horizon EMPLOYERS HLDGS DL is expected to under-perform the Ambac Financial. But the stock apears to be less risky and, when comparing its historical volatility, EMPLOYERS HLDGS DL is 2.2 times less risky than Ambac Financial. The stock trades about -0.09 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 |
EMPLOYERS HLDGS DL vs. Ambac Financial Group
Performance |
| Timeline |
| EMPLOYERS HLDGS DL |
| Ambac Financial Group |
EMPLOYERS HLDGS and Ambac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMPLOYERS HLDGS and Ambac Financial
The main advantage of trading using opposite EMPLOYERS HLDGS and Ambac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMPLOYERS HLDGS 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.| EMPLOYERS HLDGS vs. ULTRA CLEAN HLDGS | EMPLOYERS HLDGS vs. Cleanaway Waste Management | EMPLOYERS HLDGS vs. ALTAIR RES INC | EMPLOYERS HLDGS vs. Westinghouse Air Brake |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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