Correlation Between United Fire and Life Insurance
Can any of the company-specific risk be diversified away by investing in both United Fire and Life Insurance 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 Life Insurance 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 Life Insurance, you can compare the effects of market volatilities on United Fire and Life Insurance 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 Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Life Insurance.
Diversification Opportunities for United Fire and Life Insurance
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Life is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance 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 Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of United Fire i.e., United Fire and Life Insurance go up and down completely randomly.
Pair Corralation between United Fire and Life Insurance
Given the investment horizon of 90 days United Fire Group is expected to generate 1.0 times more return on investment than Life Insurance. However, United Fire is 1.0 times more volatile than Life Insurance. It trades about 0.01 of its potential returns per unit of risk. Life Insurance is currently generating about -0.08 per unit of risk. If you would invest 2,662 in United Fire Group on November 2, 2024 and sell it today you would lose (157.50) from holding United Fire Group or give up 5.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.97% |
| Values | Daily Returns |
United Fire Group vs. Life Insurance
Performance |
| Timeline |
| United Fire Group |
| Life Insurance |
United Fire and Life Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Life Insurance
The main advantage of trading using opposite United Fire and Life Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Life Insurance 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 Life Insurance will offset losses from the drop in Life Insurance'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 |
| Life Insurance vs. Iridium Communications | Life Insurance vs. Tritent International Agriculture | Life Insurance vs. National CineMedia | Life Insurance vs. MYR Group |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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