Correlation Between East Africa and United Fire
Can any of the company-specific risk be diversified away by investing in both East Africa and United Fire 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 East Africa and United Fire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and United Fire Group, you can compare the effects of market volatilities on East Africa and United Fire 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 East Africa with a short position of United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and United Fire.
Diversification Opportunities for East Africa and United Fire
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and United is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group and East Africa 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 East Africa Metals are associated (or correlated) with United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of East Africa i.e., East Africa and United Fire go up and down completely randomly.
Pair Corralation between East Africa and United Fire
If you would invest 2,009 in United Fire Group on August 28, 2024 and sell it today you would earn a total of 1,038 from holding United Fire Group or generate 51.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Africa Metals vs. United Fire Group
Performance |
| Timeline |
| East Africa Metals |
| United Fire Group |
East Africa and United Fire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Africa and United Fire
The main advantage of trading using opposite East Africa and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, United Fire 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 United Fire will offset losses from the drop in United Fire's long position.| East Africa vs. Ascendant Resources | East Africa vs. Cantex Mine Development | East Africa vs. Amarc Resources | East Africa vs. Sterling Metals Corp |
| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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