16.13 -0.2 (-1.22%) Sell

Don't invest in RDN now, it is an investor's nightmare

13 min read

RADIAN GROUP INC significantly underperformed on Friday. It delivered -1.22% to close at 16.13. It is currently trading -30% below it's 52 week high of 23.31.

[Themes containing RDN]

RDN showed a strong bearish trend over the last 3 months. During this period RDN delivered -20.46% and saw a maximum drawdown of -21.96%. There were 3 short signals during this period that returned a cumulative of +15.2% to investors.


RDN has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 5 Jul, 2016 to 12 Dec, 2017. Over the last 2 years 11 months and 10 days, RDN underperformed the SP500 index on 48% days. Which indicates that on days RDN underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months RDN was mostly loss making and delivered on average -0.34% per day. It's best return during this period (of +4.63%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -7.18%) was on Tuesday, 4 Dec, 2018. The longest stort-term trend during this period was 5 losing days, which started on 18 Oct, 2018 and ended on 24 Oct, 2018. This bearish trend lost -11.52% of investor capital.

The last 12 months saw RDN's investors making profits in 6 months and incurring losses in 6 months. RDN was less consistent in delivering monthly returs than SP500 index. RDN was also a more risky investment than SP500 index as it's worst month in the last year, Apr 2018, returned -23.98% compared to -7.28% returned by SP500 index in Oct 2018. RDN had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both RDN and SP500 index significantly outperform during months when quarterly/annual results are announced.

Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.
-- Johann Wolfgang von Goethe

RDN is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in RDN's volatility from 21 Sep, 2018 to 10 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that RDN has significant positive skewness in it's return distribution. This indicates that investors can expect RDN to recover from drawdowns quickly. Which makes RDN a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

SP500 index has more chance of extreme outcomes than RDN. Therefore, SP500 must receive a lower allocation than RDN in your portfolio. SP500 index usually has shorter drawdown period than RDN.

Based on your interest in RDN you may find it interesting to know that AMRH, APRN and NSPR have all shown remarkable performance and qualify to be on every investor's watchlist.

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