Correlation Between United Fire and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both United Fire and Selective Insurance 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 Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on United Fire and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Selective Insurance.
Diversification Opportunities for United Fire and Selective Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Selective is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of United Fire i.e., United Fire and Selective Insurance go up and down completely randomly.
Pair Corralation between United Fire and Selective Insurance
Given the investment horizon of 90 days United Fire Group is expected to generate 1.46 times more return on investment than Selective Insurance. However, United Fire is 1.46 times more volatile than Selective Insurance Group. It trades about 0.05 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.02 per unit of risk. If you would invest 2,221 in United Fire Group on August 28, 2024 and sell it today you would earn a total of 826.00 from holding United Fire Group or generate 37.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Selective Insurance Group
Performance |
| Timeline |
| United Fire Group |
| Selective Insurance |
United Fire and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Selective Insurance
The main advantage of trading using opposite United Fire and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance'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 |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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