Correlation Between United Fire and MSA Safety
Can any of the company-specific risk be diversified away by investing in both United Fire and MSA Safety 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 MSA Safety 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 MSA Safety, you can compare the effects of market volatilities on United Fire and MSA Safety 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 MSA Safety. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and MSA Safety.
Diversification Opportunities for United Fire and MSA Safety
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and MSA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety 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 MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of United Fire i.e., United Fire and MSA Safety go up and down completely randomly.
Pair Corralation between United Fire and MSA Safety
Given the investment horizon of 90 days United Fire Group is expected to generate 4.16 times more return on investment than MSA Safety. However, United Fire is 4.16 times more volatile than MSA Safety. It trades about 0.39 of its potential returns per unit of risk. MSA Safety is currently generating about 0.18 per unit of risk. If you would invest 1,964 in United Fire Group on September 1, 2024 and sell it today you would earn a total of 1,096 from holding United Fire Group or generate 55.8% 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. MSA Safety
Performance |
| Timeline |
| United Fire Group |
| MSA Safety |
United Fire and MSA Safety Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and MSA Safety
The main advantage of trading using opposite United Fire and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, MSA Safety 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 MSA Safety will offset losses from the drop in MSA Safety'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 |
| MSA Safety vs. Allegion PLC | MSA Safety vs. Resideo Technologies | MSA Safety vs. NL Industries | MSA Safety vs. Brady |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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