Correlation Between Chubb and Assured Guaranty

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

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

Diversification Opportunities for Chubb and Assured Guaranty

0.43

Correlation Coefficient

Chubb  Assured Guaranty

Very weak diversification

The 3 months correlation between Chubb and Assured is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Chubb 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 Chubb are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Chubb i.e., Chubb and Assured Guaranty go up and down completely randomly.

Pair Corralation between Chubb and Assured Guaranty

Allowing for the 90-day total investment horizon Chubb is expected to under-perform the Assured Guaranty. In addition to that, Chubb is 1.19 times more volatile than Assured Guaranty. It trades about -0.1 of its total potential returns per unit of risk. Assured Guaranty is currently generating about -0.08 per unit of volatility. If you would invest  8,877  in Assured Guaranty on May 6, 2025 and sell it today you would lose (443.00) from holding Assured Guaranty or give up 4.99% of portfolio value over 90 days.

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

Chubb  vs.  Assured Guaranty

Chubb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Assured Guaranty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assured Guaranty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Assured Guaranty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Chubb and Assured Guaranty

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

The idea behind Chubb and Assured Guaranty 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.