Correlation Between United Fire and Nexstar Broadcasting
Can any of the company-specific risk be diversified away by investing in both United Fire and Nexstar Broadcasting 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 Nexstar Broadcasting 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 Nexstar Broadcasting Group, you can compare the effects of market volatilities on United Fire and Nexstar Broadcasting 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 Nexstar Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Nexstar Broadcasting.
Diversification Opportunities for United Fire and Nexstar Broadcasting
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Nexstar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of United Fire i.e., United Fire and Nexstar Broadcasting go up and down completely randomly.
Pair Corralation between United Fire and Nexstar Broadcasting
Given the investment horizon of 90 days United Fire Group is expected to generate 1.06 times more return on investment than Nexstar Broadcasting. However, United Fire is 1.06 times more volatile than Nexstar Broadcasting Group. It trades about 0.07 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about 0.02 per unit of risk. If you would invest 1,911 in United Fire Group on September 12, 2024 and sell it today you would earn a total of 1,161 from holding United Fire Group or generate 60.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Nexstar Broadcasting Group
Performance |
| Timeline |
| United Fire Group |
| Nexstar Broadcasting |
United Fire and Nexstar Broadcasting Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Nexstar Broadcasting
The main advantage of trading using opposite United Fire and Nexstar Broadcasting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Nexstar Broadcasting 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 Nexstar Broadcasting will offset losses from the drop in Nexstar Broadcasting'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 |
| Nexstar Broadcasting vs. News Corp B | Nexstar Broadcasting vs. Fox Corp Class | Nexstar Broadcasting vs. Liberty Media | Nexstar Broadcasting vs. AMC Networks |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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