Correlation Between United Fire and Old Republic
Can any of the company-specific risk be diversified away by investing in both United Fire and Old Republic 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 Old Republic 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 Old Republic International, you can compare the effects of market volatilities on United Fire and Old Republic 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 Old Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Old Republic.
Diversification Opportunities for United Fire and Old Republic
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Old is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of United Fire i.e., United Fire and Old Republic go up and down completely randomly.
Pair Corralation between United Fire and Old Republic
Given the investment horizon of 90 days United Fire Group is expected to generate 4.93 times more return on investment than Old Republic. However, United Fire is 4.93 times more volatile than Old Republic International. It trades about 0.35 of its potential returns per unit of risk. Old Republic International is currently generating about 0.4 per unit of risk. If you would invest 1,986 in United Fire Group on August 30, 2024 and sell it today you would earn a total of 1,022 from holding United Fire Group or generate 51.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Old Republic International
Performance |
| Timeline |
| United Fire Group |
| Old Republic Interna |
United Fire and Old Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Old Republic
The main advantage of trading using opposite United Fire and Old Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Old Republic 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 Old Republic will offset losses from the drop in Old Republic'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 |
| Old Republic vs. Axa Equitable Holdings | Old Republic vs. American International Group | Old Republic vs. Arch Capital Group | Old Republic vs. Sun Life Financial |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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