Correlation Between Foot Locker and United Fire

Can any of the company-specific risk be diversified away by investing in both Foot Locker 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 Foot Locker and United Fire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Foot Locker and United Fire Group, you can compare the effects of market volatilities on Foot Locker 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 Foot Locker with a short position of United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and United Fire.

Diversification Opportunities for Foot Locker and United Fire

-0.45

Correlation Coefficient

Foot Locker  United Fire

Very good diversification

The 3 months correlation between Foot and United is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker 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 Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and United Fire go up and down completely randomly.

Pair Corralation between Foot Locker and United Fire

Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the United Fire. In addition to that, Foot Locker is 1.4 times more volatile than United Fire Group. It trades about -0.01 of its total potential returns per unit of risk. United Fire Group is currently generating about 0.06 per unit of volatility. If you would invest  2,002  in United Fire Group on October 9, 2024 and sell it today you would earn a total of  713.00  from holding United Fire Group or generate 35.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Foot Locker  vs.  United Fire Group

Foot Locker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

United Fire Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 12 (%) 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.

Pair Trading with Foot Locker and United Fire

The main advantage of trading using opposite Foot Locker and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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 Foot Locker 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.