Correlation Between MBIA and ICC Holdings

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

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

Diversification Opportunities for MBIA and ICC Holdings

-0.32

Correlation Coefficient

MBIA  ICC Holdings

Very good diversification

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

Pair Corralation between MBIA and ICC Holdings

Considering the 90-day investment horizon MBIA Inc is expected to under-perform the ICC Holdings. In addition to that, MBIA is 1.55 times more volatile than ICC Holdings. It trades about -0.17 of its total potential returns per unit of risk. ICC Holdings is currently generating about -0.02 per unit of volatility. If you would invest  1,598  in ICC Holdings on March 1, 2024 and sell it today you would lose (8.00) from holding ICC Holdings or give up 0.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.09%
Values	Daily Returns

MBIA Inc  vs.  ICC Holdings

MBIA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MBIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ICC Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, ICC Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with MBIA and ICC Holdings

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

The idea behind MBIA Inc and ICC Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.