Correlation Between United Fire and BrightSpring Health
Can any of the company-specific risk be diversified away by investing in both United Fire and BrightSpring Health 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 BrightSpring Health 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 BrightSpring Health Services,, you can compare the effects of market volatilities on United Fire and BrightSpring Health 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 BrightSpring Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and BrightSpring Health.
Diversification Opportunities for United Fire and BrightSpring Health
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and BrightSpring is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of United Fire i.e., United Fire and BrightSpring Health go up and down completely randomly.
Pair Corralation between United Fire and BrightSpring Health
Given the investment horizon of 90 days United Fire Group is expected to under-perform the BrightSpring Health. But the stock apears to be less risky and, when comparing its historical volatility, United Fire Group is 1.12 times less risky than BrightSpring Health. The stock trades about -0.15 of its potential returns per unit of risk. The BrightSpring Health Services, is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 6,842 in BrightSpring Health Services, on October 22, 2024 and sell it today you would lose (123.00) from holding BrightSpring Health Services, or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. BrightSpring Health Services,
Performance |
| Timeline |
| United Fire Group |
| BrightSpring Health |
United Fire and BrightSpring Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and BrightSpring Health
The main advantage of trading using opposite United Fire and BrightSpring Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, BrightSpring Health 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 BrightSpring Health will offset losses from the drop in BrightSpring Health's long position.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
| BrightSpring Health vs. NETGEAR | BrightSpring Health vs. United Fire Group | BrightSpring Health vs. Universal Insurance Holdings | BrightSpring Health vs. National CineMedia |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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