Correlation Between NI Holdings and United Fire

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

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

Diversification Opportunities for NI Holdings and United Fire

0.87

Correlation Coefficient

NI Holdings  United Fire

Very poor diversification

The 3 months correlation between NODK and United is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings 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 NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and United Fire go up and down completely randomly.

Pair Corralation between NI Holdings and United Fire

Given the investment horizon of 90 days NI Holdings is expected to generate 1.35 times less return on investment than United Fire. But when comparing it to its historical volatility, NI Holdings is 1.4 times less risky than United Fire. It trades about 0.03 of its potential returns per unit of risk. United Fire Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,410  in United Fire Group on December 2, 2024 and sell it today you would earn a total of  397.00  from holding United Fire Group or generate 16.47% return on investment over 90 days.

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

NI Holdings  vs.  United Fire Group

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental 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

Very Weak

Over the last 90 days United Fire Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NI Holdings and United Fire

The main advantage of trading using opposite NI Holdings and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.