Correlation Between United Fire and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both United Fire and NYSE Composite 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 NYSE Composite 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 NYSE Composite, you can compare the effects of market volatilities on United Fire and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and NYSE Composite.
Diversification Opportunities for United Fire and NYSE Composite
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and NYSE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of United Fire i.e., United Fire and NYSE Composite go up and down completely randomly.
Pair Corralation between United Fire and NYSE Composite
Given the investment horizon of 90 days United Fire Group is expected to generate 6.0 times more return on investment than NYSE Composite. However, United Fire is 6.0 times more volatile than NYSE Composite. It trades about 0.39 of its potential returns per unit of risk. NYSE Composite is currently generating about 0.05 per unit of risk. If you would invest 2,528 in United Fire Group on September 16, 2024 and sell it today you would earn a total of 557.00 from holding United Fire Group or generate 22.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. NYSE Composite
Performance |
| Timeline |
United Fire and NYSE Composite Volatility Contrast
Predicted Return Density |
| Returns |
United Fire Group
Pair trading matchups for United Fire
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with United Fire and NYSE Composite
The main advantage of trading using opposite United Fire and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.| United Fire vs. W R Berkley | United Fire vs. Markel | United Fire vs. RLI Corp | United Fire vs. CNA Financial |
| NYSE Composite vs. Employers Holdings | NYSE Composite vs. Palomar Holdings | NYSE Composite vs. United Fire Group | NYSE Composite vs. Ross Stores |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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