Correlation Between Assured Guaranty and Radian

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

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

Diversification Opportunities for Assured Guaranty and Radian

0.69

Correlation Coefficient

Assured Guaranty  Radian

Poor diversification

The 3 months correlation between Assured and Radian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group and Assured Guaranty 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 Assured Guaranty 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 Assured Guaranty i.e., Assured Guaranty and Radian go up and down completely randomly.

Pair Corralation between Assured Guaranty and Radian

Assuming the 90 days horizon Assured Guaranty is expected to generate 1.04 times less return on investment than Radian. In addition to that, Assured Guaranty is 1.75 times more volatile than Radian Group. It trades about 0.05 of its total potential returns per unit of risk. Radian Group is currently generating about 0.08 per unit of volatility. If you would invest  1,625  in Radian Group on September 22, 2024 and sell it today you would earn a total of  1,355  from holding Radian Group or generate 83.38% return on investment over 90 days.

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

Assured Guaranty  vs.  Radian Group

Assured Guaranty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Assured Guaranty reported solid returns over the last few months and may actually be approaching a breakup point.

Radian Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radian Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Radian is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Assured Guaranty and Radian

The main advantage of trading using opposite Assured Guaranty and Radian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assured Guaranty 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.

The idea behind Assured Guaranty and Radian Group 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..