Enact Holdings’ Low‑Beta Edge in a High‑Volatility Market

Why the stock’s clean risk profile may deliver upside while limiting downside over the next year

ACT Enact Holdings, Inc.

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

Enact Holdings, Inc. (ACT) — Return Performance

Enact Holdings, Inc. (ACT) delivered a modest 0.0% total return over the past month, lagging its sector benchmark by -1.4%, but posted a 2.4% gain in the trailing three months despite an underperformance of -10.7% versus the XLF ETF. The stock’s performance improved markedly over longer horizons, generating 13.13% YTD return and outpacing the sector by 12.57%, while the two‑year and three‑year periods saw robust total returns of 40.14% and 79.51%, respectively, each exceeding sector gains by double‑digit percentages.

Period Returns vs S&P 500 & XLF

Monthly Returns Heatmap

ACT

Short‑term performance has been flat to slightly negative relative to the financial services sector, reflecting near‑zero monthly returns and a sizable three‑month alpha deficit. Over medium to long horizons (1Y–3Y), ACT generated strong positive alpha, outpacing its benchmark by 12.57% YTD, 10.14% over two years, and 18.19% over three years, indicating that the stock’s upside potential has been realized more fully in longer time frames.

Returns Overview

Enact Holdings, Inc. (ACT) — Return Charts

Volatility Analysis

Enact Holdings, Inc. (ACT) — Volatility Profile

Enact Holdings, Inc. (ACT) exhibits elevated price variability relative to the broader market, with an annualized volatility of 24.76% compared with the S&P 500’s 17.78%, indicating a 39% higher dispersion of returns. The stock’s downside risk profile is pronounced: a downside deviation of 16.71% signals that losses occur more frequently and severely than the benchmark, while the historical maximum drawdown of -20.26% unfolded over roughly ten weeks in late‑2022 before taking nearly nine months to recover, underscoring susceptibility to sharp declines. Recent short‑term volatility measures—19.04% over 60 days and 22.43% over 252 days—remain below the long‑run average of 24.76%, suggesting a modest easing of price swings but still above market norms.

Volatility Metrics

ACT

The company’s volatility is substantially higher than the S&P 500, reflecting greater uncertainty in its earnings and sector dynamics. Downside deviation at 16.71% and a max drawdown exceeding 20% illustrate heightened downside exposure, with the drawdown lasting over eight months to achieve full recovery. Although the current 60‑day and 252‑day volatilities are modestly lower than the historical average, they remain above benchmark levels, indicating that risk remains elevated despite recent stabilization.

Annualized volatility of ACT is 39% higher than the S&P 500.
Downside deviation of 16.71% points to more frequent loss periods versus the market.
Maximum drawdown of -20.26% persisted for roughly ten weeks and took nine months to recover.
Current 60‑day (19.04%) and 252‑day (22.43%) volatilities are below the long‑term average but still exceed the S&P 500’s volatility.
Risk characteristics remain above market norms, indicating a higher risk premium for investors.

Positive Characteristics
Short‑term volatility has trended lower than the historical average, suggesting a potential easing of price swings.
The drawdown recovery completed in mid‑2023, demonstrating resilience after a significant decline.

Volatility Analysis

Enact Holdings, Inc. (ACT) — Volatility & Drawdown Charts

Beta & Correlation

Enact Holdings, Inc. (ACT) — Beta Profile

Enact Holdings, Inc. (ACT) exhibits a trailing beta of 0.599 versus the S&P 500, placing it firmly in the defensive range (<0.8). This indicates that the stock moves less than one‑half as much as the broad market on average, offering lower volatility during equity rallies and downturns. However, its sector beta of 0.723 against the Financial Services index (XLF) suggests a slightly higher sensitivity to sector dynamics, meaning that movements within financial services have a modestly larger impact on ACT than overall market swings. The asymmetric upside and downside betas—0.745 versus 0.542—highlight that ACT tends to capture more of the upside when the market rises than it loses on the downside when the market falls. The relatively low R‑squared of 0.175 (correlation 0.418) underscores that only about 17.5% of the stock’s variance is explained by market movements, leaving a substantial 82.5% as idiosyncratic risk. This split implies that diversification benefits are strong: ACT’s price behavior is driven largely by company‑specific factors rather than broad market trends.

Beta & Correlation Metrics

ACT

The trailing beta of 0.599 classifies ACT as a defensive stock, offering investors reduced exposure to systemic market swings while still participating in modest upside moves. Its higher sector beta (0.723) reveals that financial‑service trends exert a slightly stronger influence than the overall market, which is useful for risk budgeting within a sector‑tilted portfolio. The upside beta of 0.745 versus downside beta of 0.542 indicates an asymmetry where ACT captures roughly 37% more of positive market returns than it sheds on declines, a characteristic that can enhance return potential in bullish environments while still providing a cushion during downturns. With an R‑squared of only 0.175, the majority of its price variance is idiosyncratic, suggesting that company‑specific developments—such as earnings surprises or strategic initiatives—will dominate performance.

ACT's market beta (0.599) signals defensive behavior, limiting exposure to broad equity volatility.
Sector beta (0.723) exceeds market beta, indicating that financial‑service dynamics are a more material risk driver.
Upside beta (0.745) is 37% higher than downside beta (0.542), revealing asymmetric return capture favoring bullish periods.
R-squared of 0.175 means only 17.5% of price movement aligns with the S&P 500, leaving 82.5% as idiosyncratic risk.
Systematic risk accounts for 17.5% of total variance versus 82.5% idiosyncratic, highlighting strong diversification potential.

Positive Characteristics
Defensive market beta reduces portfolio volatility relative to the S&P 500.
Higher upside beta provides amplified participation in market rallies.
Low R-squared and high idiosyncratic risk suggest ample opportunity for active stock selection.

Beta & Correlation

Enact Holdings, Inc. (ACT) — Rolling Beta

Positive Notes

Defensive market beta reduces portfolio volatility relative to the S&P 500.

Higher upside beta provides amplified participation in market rallies.

Low R-squared and high idiosyncratic risk suggest ample opportunity for active stock selection.

Risk-Adjusted Returns

Enact Holdings, Inc. (ACT) — Risk-Adjusted Performance

Enact Holdings, Inc. (ACT) delivers a Sharpe ratio of 0.767, indicating that its risk‑adjusted return falls short of the benchmark threshold of 1.0 for a good risk‑adjusted performance. However, the company’s Sortino ratio of 1.136 exceeds its Sharpe ratio, suggesting that downside volatility is materially lower than overall volatility and that the stock has generated stronger returns per unit of harmful risk. The Calmar ratio of 1.116 points to modest resilience against drawdowns, as the firm’s annualized return roughly matches its worst historical peak‑to‑trough loss, while an Information Ratio of 0.444 reflects a borderline capacity for consistent alpha generation relative to a benchmark.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

ACT

The Sharpe ratio of 0.767 signals that ACT’s excess return over the risk‑free rate is modest when adjusted for total volatility, positioning it below the “good” threshold and implying limited compensation for investors bearing market risk. In contrast, the Sortino ratio of 1.136 demonstrates a favorable downside profile; the stock has produced more than one unit of return per unit of harmful (downside) deviation, which can be appealing to investors focused on capital preservation. The Calmar ratio of 1.116 indicates that ACT’s average annual return is only slightly higher than its maximum historical drawdown, highlighting that while returns are positive, they have been achieved with a relatively severe peak‑to‑trough loss. An Information Ratio of 0.444 suggests the firm has generated some alpha but falls short of the 0.5 benchmark for consistent outperformance, pointing to limited skill in active management.

Sharpe ratio below 1.0 indicates sub‑optimal risk‑adjusted return relative to the market.
Sortino ratio exceeds Sharpe, revealing a lower downside volatility than overall volatility.
Calmar ratio near 1.0 shows returns are only marginally higher than the worst historical drawdown.
Information Ratio under 0.5 suggests modest and inconsistent alpha generation.
Treynor ratio of 31.714 reflects high return per unit of systematic risk, but must be interpreted alongside total volatility metrics.

Positive Characteristics
Sortino ratio above 1.0 highlights a strong downside‑risk profile.
High Treynor ratio indicates the stock has delivered substantial returns relative to market beta.
Positive Calmar ratio demonstrates that the company can generate returns despite drawdown pressures.

Risk-Adjusted Returns

Enact Holdings, Inc. (ACT) — Rolling Sharpe & Sortino

Positive Notes

Sortino ratio above 1.0 highlights a strong downside‑risk profile.

High Treynor ratio indicates the stock has delivered substantial returns relative to market beta.

Positive Calmar ratio demonstrates that the company can generate returns despite drawdown pressures.

Market Regime Analysis

Enact Holdings, Inc. (ACT) — Regime Behavior

Enact Holdings, Inc. (ACT) demonstrates pronounced sensitivity to market volatility within bullish environments, delivering an average monthly return of 2.62% during Bull-HighVol periods—more than double its 1.28% return in the calmer Bull-LowVol regime. In contrast, the stock’s performance deteriorates sharply when markets turn bearish and tranquil, posting a -4.98% average loss in Bear-LowVol conditions, while it surprisingly generates a modest 1.45% gain during volatile bear markets (Bear-HighVol). The upside capture of 82.6% coupled with a low downside capture of 27.2% yields an overall capture ratio of 3.04, indicating that ACT captures substantially more upside than downside across regimes, a characteristic prized by defensive investors.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

ACT

During Bull-HighVol periods, ACT’s elevated average return (2.62% per month) suggests the business benefits from heightened market activity, possibly due to increased demand for its niche products or services that thrive on higher consumer spending volatility. The modest 1.28% return in Bull-LowVol indicates less upside when markets are stable, reflecting a reliance on market dynamism for growth. In Bear-LowVol conditions, the sharp -4.98% loss signals vulnerability to orderly declines, likely because reduced discretionary spending hurts revenue streams. However, the positive 1.45% performance in Bear-HighVol suggests some resilience during turbulent downturns, perhaps due to defensive pricing power or lower correlation with broader market sentiment.

Market Regime Analysis

Enact Holdings, Inc. (ACT) — Regime & Capture Charts

Regime Timeline

ACT’s upside capture (82.6%) exceeds its downside capture (27.2%), producing a strong capture ratio of 3.04.
The stock thrives in volatile bullish markets, delivering over twice the return of calm bull markets.
Defensive strength is limited; performance turns negative in orderly bear markets but remains positive in volatile bear periods.
Current Bull-HighVol regime aligns with ACT’s strongest historical return profile, supporting continued upside potential.
The disparity between Bear-LowVol (-4.98%) and Bear-HighVol (+1.45%) highlights the stock’s asymmetric response to market stress.

Positive Characteristics
High capture ratio indicates efficient upside participation while limiting downside exposure.
Positive performance in Bear-HighVol suggests a degree of defensive resilience during market turbulence.

Investment Highlights & Risk Summary

Enact Holdings, Inc. (ACT) — Summary & Implications

Enact Holdings delivered a solid 13.13% total return over the past year, yet its alpha of -5.87% versus the S&P 500 indicates underperformance on an absolute market basis. The stock’s low beta of 0.599 and downside capture of just 27.2% suggest it is less sensitive to broad market declines, providing defensive characteristics in volatile environments. Risk‑adjusted performance is mixed: a Sharpe ratio of 0.767 falls short of the benchmark threshold of 1.0, while a Sortino ratio of 1.136 reflects stronger returns per unit of downside risk. The company’s upside capture of 82.6% and sector alpha of 12.57% demonstrate that it outperformed its financial‑services peers despite modest absolute excess return.

Summary Dashboard

Investment Highlights

Sector outperformance: ACT generated a sector alpha of 12.57% versus the XLF benchmark, indicating strong relative performance within financial services.
Defensive beta profile: With an overall beta of 0.599 and downside capture of 27.2%, the stock is considerably less volatile than the market during declines.
Positive upside capture: The company captured 82.6% of S&P 500 gains, providing meaningful participation in bullish market moves while limiting losses.
Reasonable Sortino ratio: A Sortino of 1.136 signals that upside potential per unit of downside risk is above one, a favorable sign for risk‑averse investors.

Risk-Return Rankings

ACT MODERATE

Moderate risk with defensive beta and low downside capture, but limited upside participation and sub‑benchmark Sharpe.

Strength: Low downside capture (27.2%) and sector outperformance (+12.57% vs XLF).

Concern: Negative alpha versus the S&P (-5.87%) and Sharpe below 1.0.

Key Takeaways

Enact Holdings offers defensive characteristics through low market beta and limited downside exposure.
Relative performance to its sector is strong, but absolute outperformance of the broader market remains lacking.
Risk‑adjusted returns are mixed; the Sortino exceeds one while the Sharpe does not meet the preferred >1.0 threshold.
Volatility at 24.76% and a max drawdown of -20.26% suggest investors should be comfortable with moderate price swings.

PORTFOLIO IMPLICATIONS

ACT can serve as a stabilizing component in a diversified equity portfolio, particularly for investors seeking exposure to financial services with reduced downside risk. Its low beta and modest volatility complement higher‑beta growth stocks, helping to smooth overall portfolio returns during market corrections while still providing reasonable upside participation when equities rally.

ACT

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

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