Correlation Between Enact Holdings and Loews Corp

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

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

Diversification Opportunities for Enact Holdings and Loews Corp

-0.26

Correlation Coefficient

Enact Holdings  Loews Corp

Very good diversification

The 3 months correlation between Enact and Loews is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Enact Holdings and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Enact Holdings i.e., Enact Holdings and Loews Corp go up and down completely randomly.

Pair Corralation between Enact Holdings and Loews Corp

Considering the 90-day investment horizon Enact Holdings is expected to generate 1.43 times less return on investment than Loews Corp. In addition to that, Enact Holdings is 1.37 times more volatile than Loews Corp. It trades about 0.06 of its total potential returns per unit of risk. Loews Corp is currently generating about 0.12 per unit of volatility. If you would invest  8,274  in Loews Corp on September 15, 2024 and sell it today you would earn a total of  144.00  from holding Loews Corp or generate 1.74% return on investment over 90 days.

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

Enact Holdings  vs.  Loews Corp

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.

Loews Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Enact Holdings and Loews Corp

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

The idea behind Enact Holdings and Loews Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.