Correlation Between Visteon Corp and United Fire
Can any of the company-specific risk be diversified away by investing in both Visteon Corp and United Fire 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 Visteon Corp and United Fire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visteon Corp and United Fire Group, you can compare the effects of market volatilities on Visteon Corp and United Fire 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 Visteon Corp with a short position of United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visteon Corp and United Fire.
Diversification Opportunities for Visteon Corp and United Fire
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visteon and United is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group and Visteon Corp 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 Visteon Corp are associated (or correlated) with United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Visteon Corp i.e., Visteon Corp and United Fire go up and down completely randomly.
Pair Corralation between Visteon Corp and United Fire
Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the United Fire. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 3.31 times less risky than United Fire. The stock trades about -0.1 of its potential returns per unit of risk. The United Fire Group is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 2,009 in United Fire Group on August 27, 2024 and sell it today you would earn a total of 980.00 from holding United Fire Group or generate 48.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visteon Corp vs. United Fire Group
Performance |
| Timeline |
| Visteon Corp |
| United Fire Group |
Visteon Corp and United Fire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visteon Corp and United Fire
The main advantage of trading using opposite Visteon Corp and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visteon Corp position performs unexpectedly, United Fire 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 United Fire will offset losses from the drop in United Fire's long position.The idea behind Visteon Corp and United Fire Group 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.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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