Correlation Between Loews Corp and United Fire

Can any of the company-specific risk be diversified away by investing in both Loews 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 Loews 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 Loews Corp and United Fire Group, you can compare the effects of market volatilities on Loews 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 Loews Corp with a short position of United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loews Corp and United Fire.

Diversification Opportunities for Loews Corp and United Fire

0.13

Correlation Coefficient

Loews Corp  United Fire

Average diversification

The 3 months correlation between Loews and United is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Loews 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 Loews 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 Loews 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 Loews Corp i.e., Loews Corp and United Fire go up and down completely randomly.

Pair Corralation between Loews Corp and United Fire

Taking into account the 90-day investment horizon Loews Corp is expected to generate 0.6 times more return on investment than United Fire. However, Loews Corp is 1.68 times less risky than United Fire. It trades about 0.11 of its potential returns per unit of risk. United Fire Group is currently generating about 0.05 per unit of risk. If you would invest  8,462  in Loews Corp on December 27, 2024 and sell it today you would earn a total of  679.00  from holding Loews Corp or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Loews Corp  vs.  United Fire Group

Loews Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

United Fire Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, United Fire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Loews Corp and United Fire

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

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.