Correlation Between United Fire and Mills Music
Can any of the company-specific risk be diversified away by investing in both United Fire and Mills Music 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 Mills Music 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 Mills Music Trust, you can compare the effects of market volatilities on United Fire and Mills Music 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 Mills Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Mills Music.
Diversification Opportunities for United Fire and Mills Music
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Mills is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Mills Music Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mills Music Trust 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 Mills Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mills Music Trust has no effect on the direction of United Fire i.e., United Fire and Mills Music go up and down completely randomly.
Pair Corralation between United Fire and Mills Music
Given the investment horizon of 90 days United Fire is expected to generate 1.76 times less return on investment than Mills Music. But when comparing it to its historical volatility, United Fire Group is 1.81 times less risky than Mills Music. It trades about 0.03 of its potential returns per unit of risk. Mills Music Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,568 in Mills Music Trust on September 3, 2024 and sell it today you would earn a total of 279.00 from holding Mills Music Trust or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 65.25% |
| Values | Daily Returns |
United Fire Group vs. Mills Music Trust
Performance |
| Timeline |
| United Fire Group |
| Mills Music Trust |
United Fire and Mills Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Mills Music
The main advantage of trading using opposite United Fire and Mills Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Mills Music 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 Mills Music will offset losses from the drop in Mills Music'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 |
| Mills Music vs. Cintas | Mills Music vs. Thomson Reuters Corp | Mills Music vs. Global Payments | Mills Music vs. RB Global |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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