Correlation Between James River and Radian

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

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

Diversification Opportunities for James River and Radian

0.2

Correlation Coefficient

James River  Radian

Modest diversification

The 3 months correlation between James and Radian is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding James River Group and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group and James River 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 James River Group 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 James River i.e., James River and Radian go up and down completely randomly.

Pair Corralation between James River and Radian

Given the investment horizon of 90 days James River Group is expected to generate 2.12 times more return on investment than Radian. However, James River is 2.12 times more volatile than Radian Group. It trades about 0.1 of its potential returns per unit of risk. Radian Group is currently generating about 0.0 per unit of risk. If you would invest  479.00  in James River Group on May 7, 2025 and sell it today you would earn a total of  80.00  from holding James River Group or generate 16.7% return on investment over 90 days.

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

James River Group  vs.  Radian Group

James River Group

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in James River Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, James River reported solid returns over the last few months and may actually be approaching a breakup point.

Radian Group

Risk-Adjusted Performance

Weakest

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

Pair Trading with James River and Radian

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

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .