Correlation Between Essent and Onity

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

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

Diversification Opportunities for Essent and Onity

0.32

Correlation Coefficient

Essent  Onity

Weak diversification

The 3 months correlation between Essent and Onity is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Essent Group and Onity Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onity Group and Essent 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 Essent Group are associated (or correlated) with Onity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onity Group has no effect on the direction of Essent i.e., Essent and Onity go up and down completely randomly.

Pair Corralation between Essent and Onity

Given the investment horizon of 90 days Essent Group is expected to under-perform the Onity. But the stock apears to be less risky and, when comparing its historical volatility, Essent Group is 1.66 times less risky than Onity. The stock trades about -0.03 of its potential returns per unit of risk. The Onity Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,745  in Onity Group on May 5, 2025 and sell it today you would lose (26.00) from holding Onity Group or give up 0.69% of portfolio value over 90 days.

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

Essent Group  vs.  Onity Group

Essent Group

Risk-Adjusted Performance

Very Weak

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

Onity Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Essent and Onity

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

The idea behind Essent Group and Onity 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.