Correlation Between RadNet and United Fire

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

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

Diversification Opportunities for RadNet and United Fire

0.74

Correlation Coefficient

RadNet  United Fire

Poor diversification

The 3 months correlation between RadNet and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding RadNet Inc 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 RadNet 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 RadNet Inc 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 RadNet i.e., RadNet and United Fire go up and down completely randomly.

Pair Corralation between RadNet and United Fire

Given the investment horizon of 90 days RadNet Inc is expected to generate 1.17 times more return on investment than United Fire. However, RadNet is 1.17 times more volatile than United Fire Group. It trades about -0.34 of its potential returns per unit of risk. United Fire Group is currently generating about -0.64 per unit of risk. If you would invest  7,798  in RadNet Inc on October 15, 2024 and sell it today you would lose (920.00) from holding RadNet Inc or give up 11.8% of portfolio value over 90 days.

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

RadNet Inc  vs.  United Fire Group

RadNet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RadNet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RadNet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

United Fire Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 9 (%) 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 RadNet and United Fire

The main advantage of trading using opposite RadNet and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RadNet 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 RadNet Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.