Correlation Between United Fire and Catalent
Can any of the company-specific risk be diversified away by investing in both United Fire and Catalent 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 Catalent 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 Catalent, you can compare the effects of market volatilities on United Fire and Catalent 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 Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Catalent.
Diversification Opportunities for United Fire and Catalent
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Catalent is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of United Fire i.e., United Fire and Catalent go up and down completely randomly.
Pair Corralation between United Fire and Catalent
Given the investment horizon of 90 days United Fire is expected to generate 1.47 times less return on investment than Catalent. But when comparing it to its historical volatility, United Fire Group is 1.24 times less risky than Catalent. It trades about 0.03 of its potential returns per unit of risk. Catalent is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,678 in Catalent on September 3, 2024 and sell it today you would earn a total of 1,433 from holding Catalent or generate 30.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Catalent
Performance |
| Timeline |
| United Fire Group |
| Catalent |
United Fire and Catalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Catalent
The main advantage of trading using opposite United Fire and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Catalent 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 Catalent will offset losses from the drop in Catalent'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 |
| Catalent vs. IQVIA Holdings | Catalent vs. West Pharmaceutical Services | Catalent vs. Charles River Laboratories | Catalent vs. Bio Rad Laboratories |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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