Correlation Between United Fire and UNION

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

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

Diversification Opportunities for United Fire and UNION

-0.59

Correlation Coefficient

United Fire  UNION

Excellent diversification

The 3 months correlation between United and UNION is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and UNION PAC P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNION PAC P and United Fire 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 United Fire Group are associated (or correlated) with UNION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNION PAC P has no effect on the direction of United Fire i.e., United Fire and UNION go up and down completely randomly.

Pair Corralation between United Fire and UNION

Given the investment horizon of 90 days United Fire Group is expected to generate 2.27 times more return on investment than UNION. However, United Fire is 2.27 times more volatile than UNION PAC P. It trades about 0.08 of its potential returns per unit of risk. UNION PAC P is currently generating about 0.04 per unit of risk. If you would invest  1,937  in United Fire Group on September 14, 2024 and sell it today you would earn a total of  1,158  from holding United Fire Group or generate 59.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	52.42%
Values	Daily Returns

United Fire Group  vs.  UNION PAC P

United Fire Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, United Fire unveiled solid returns over the last few months and may actually be approaching a breakup point.

UNION PAC P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNION PAC P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for UNION PAC P investors.

Pair Trading with United Fire and UNION

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

The idea behind United Fire Group and UNION PAC P 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.