Correlation Between United Fire and Danakali
Can any of the company-specific risk be diversified away by investing in both United Fire and Danakali 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 Danakali 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 Danakali, you can compare the effects of market volatilities on United Fire and Danakali 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 Danakali. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Danakali.
Diversification Opportunities for United Fire and Danakali
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Danakali is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Danakali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danakali 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 Danakali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danakali has no effect on the direction of United Fire i.e., United Fire and Danakali go up and down completely randomly.
Pair Corralation between United Fire and Danakali
Given the investment horizon of 90 days United Fire is expected to generate 8.57 times less return on investment than Danakali. But when comparing it to its historical volatility, United Fire Group is 5.9 times less risky than Danakali. It trades about 0.05 of its potential returns per unit of risk. Danakali is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Danakali on September 12, 2024 and sell it today you would lose (6.00) from holding Danakali or give up 27.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 57.1% |
| Values | Daily Returns |
United Fire Group vs. Danakali
Performance |
| Timeline |
| United Fire Group |
| Danakali |
United Fire and Danakali Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Danakali
The main advantage of trading using opposite United Fire and Danakali positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Danakali 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 Danakali will offset losses from the drop in Danakali'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 |
| Danakali vs. NetSol Technologies | Danakali vs. Marchex | Danakali vs. National CineMedia | Danakali vs. Where Food Comes |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |