Correlation Between Global Indemnity and Enstar Group

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

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

Diversification Opportunities for Global Indemnity and Enstar Group

-0.18

Correlation Coefficient

Global Indemnity  Enstar Group

Good diversification

The 3 months correlation between Global and Enstar is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and Enstar Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enstar Group Limited and Global Indemnity 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 Global Indemnity PLC are associated (or correlated) with Enstar Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enstar Group Limited has no effect on the direction of Global Indemnity i.e., Global Indemnity and Enstar Group go up and down completely randomly.

Pair Corralation between Global Indemnity and Enstar Group

Given the investment horizon of 90 days Global Indemnity PLC is expected to generate 2.13 times more return on investment than Enstar Group. However, Global Indemnity is 2.13 times more volatile than Enstar Group Limited. It trades about 0.17 of its potential returns per unit of risk. Enstar Group Limited is currently generating about -0.07 per unit of risk. If you would invest  2,981  in Global Indemnity PLC on February 2, 2024 and sell it today you would earn a total of  218.00  from holding Global Indemnity PLC or generate 7.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.96%
Values	Daily Returns

Global Indemnity PLC  vs.  Enstar Group Limited

Global Indemnity PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Global Indemnity demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Enstar Group Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enstar Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Enstar Group may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Global Indemnity and Enstar Group

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

The idea behind Global Indemnity PLC and Enstar Group Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.