Correlation Between MSA Safety and United Fire

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

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

Diversification Opportunities for MSA Safety and United Fire

-0.04

Correlation Coefficient

MSA Safety  United Fire

Good diversification

The 3 months correlation between MSA and United is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety 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 MSA Safety 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 MSA Safety 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 MSA Safety i.e., MSA Safety and United Fire go up and down completely randomly.

Pair Corralation between MSA Safety and United Fire

Considering the 90-day investment horizon MSA Safety is expected to under-perform the United Fire. But the stock apears to be less risky and, when comparing its historical volatility, MSA Safety is 1.81 times less risky than United Fire. The stock trades about -0.17 of its potential returns per unit of risk. The United Fire Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,894  in United Fire Group on December 24, 2024 and sell it today you would earn a total of  20.00  from holding United Fire Group or generate 0.69% return on investment over 90 days.

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

MSA Safety  vs.  United Fire Group

MSA Safety

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Fire Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 1 (%) 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 MSA Safety and United Fire

The main advantage of trading using opposite MSA Safety and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety 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 MSA Safety 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.