Correlation Between United Fire and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both United Fire and Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture, you can compare the effects of market volatilities on United Fire and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Hooker Furniture.
Diversification Opportunities for United Fire and Hooker Furniture
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Hooker is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of United Fire i.e., United Fire and Hooker Furniture go up and down completely randomly.
Pair Corralation between United Fire and Hooker Furniture
Given the investment horizon of 90 days United Fire Group is expected to generate 1.79 times more return on investment than Hooker Furniture. However, United Fire is 1.79 times more volatile than Hooker Furniture. It trades about 0.42 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.2 per unit of risk. If you would invest 1,932 in United Fire Group on September 3, 2024 and sell it today you would earn a total of 1,128 from holding United Fire Group or generate 58.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Hooker Furniture
Performance |
| Timeline |
| United Fire Group |
| Hooker Furniture |
United Fire and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Hooker Furniture
The main advantage of trading using opposite United Fire and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture'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 |
| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Natuzzi SpA | Hooker Furniture vs. Flexsteel Industries | Hooker Furniture vs. Hamilton Beach Brands |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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