Correlation Between Enact Holdings and Employers Holdings

Can any of the company-specific risk be diversified away by investing in both Enact Holdings and Employers Holdings 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 Enact Holdings and Employers Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enact Holdings and Employers Holdings, you can compare the effects of market volatilities on Enact Holdings and Employers Holdings 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 Enact Holdings with a short position of Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enact Holdings and Employers Holdings.

Diversification Opportunities for Enact Holdings and Employers Holdings

-0.42

Correlation Coefficient

Enact Holdings  Employers Holdings

Very good diversification

The 3 months correlation between Enact and Employers is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Enact Holdings and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings and Enact Holdings 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 Enact Holdings are associated (or correlated) with Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Enact Holdings i.e., Enact Holdings and Employers Holdings go up and down completely randomly.

Pair Corralation between Enact Holdings and Employers Holdings

Considering the 90-day investment horizon Enact Holdings is expected to generate 12.13 times less return on investment than Employers Holdings. But when comparing it to its historical volatility, Enact Holdings is 1.28 times less risky than Employers Holdings. It trades about 0.01 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,833  in Employers Holdings on September 2, 2024 and sell it today you would earn a total of  503.00  from holding Employers Holdings or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enact Holdings  vs.  Employers Holdings

Enact Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enact Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Enact Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Employers Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enact Holdings and Employers Holdings

The main advantage of trading using opposite Enact Holdings and Employers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enact Holdings position performs unexpectedly, Employers Holdings 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 Employers Holdings will offset losses from the drop in Employers Holdings' long position.

The idea behind Enact Holdings and Employers Holdings 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.