Correlation Between United Fire and Telecom

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Can any of the company-specific risk be diversified away by investing in both United Fire and Telecom 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 Telecom 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 Telecom Italia Capital, you can compare the effects of market volatilities on United Fire and Telecom 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 Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Telecom.

Diversification Opportunities for United Fire and Telecom

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between United and Telecom is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Telecom Italia Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia Capital 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 Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia Capital has no effect on the direction of United Fire i.e., United Fire and Telecom go up and down completely randomly.

Pair Corralation between United Fire and Telecom

Given the investment horizon of 90 days United Fire Group is expected to generate 2.15 times more return on investment than Telecom. However, United Fire is 2.15 times more volatile than Telecom Italia Capital. It trades about 0.02 of its potential returns per unit of risk. Telecom Italia Capital is currently generating about 0.02 per unit of risk. If you would invest  2,687  in United Fire Group on September 14, 2024 and sell it today you would earn a total of  408.00  from holding United Fire Group or generate 15.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.99%
ValuesDaily Returns

United Fire Group  vs.  Telecom Italia Capital

 Performance 
       Timeline  
United Fire Group 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, United Fire unveiled solid returns over the last few months and may actually be approaching a breakup point.
Telecom Italia Capital 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Telecom Italia Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for Telecom Italia Capital investors.

United Fire and Telecom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Fire and Telecom

The main advantage of trading using opposite United Fire and Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Telecom 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 Telecom will offset losses from the drop in Telecom's long position.
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The idea behind United Fire Group and Telecom Italia Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stocks Directory module to find actively traded stocks across global markets.

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