Correlation Between ICC Holdings and Essent

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

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

Diversification Opportunities for ICC Holdings and Essent

-0.6

Correlation Coefficient

ICC Holdings  Essent

Excellent diversification

The 3 months correlation between ICC and Essent is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ICC Holdings and Essent Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essent Group and ICC 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 ICC Holdings are associated (or correlated) with Essent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essent Group has no effect on the direction of ICC Holdings i.e., ICC Holdings and Essent go up and down completely randomly.

Pair Corralation between ICC Holdings and Essent

Given the investment horizon of 90 days ICC Holdings is expected to generate 0.32 times more return on investment than Essent. However, ICC Holdings is 3.16 times less risky than Essent. It trades about 0.12 of its potential returns per unit of risk. Essent Group is currently generating about -0.02 per unit of risk. If you would invest  2,218  in ICC Holdings on September 23, 2024 and sell it today you would earn a total of  168.00  from holding ICC Holdings or generate 7.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.7%
Values	Daily Returns

ICC Holdings  vs.  Essent Group

ICC Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Essent Group

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ICC Holdings and Essent

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

The idea behind ICC Holdings and Essent 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.