Correlation Between CVR Partners and United Fire

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

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

Diversification Opportunities for CVR Partners and United Fire

-0.74

Correlation Coefficient

CVR Partners  United Fire

Pay attention - limited upside

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

Pair Corralation between CVR Partners and United Fire

Considering the 90-day investment horizon CVR Partners LP is expected to generate 0.79 times more return on investment than United Fire. However, CVR Partners LP is 1.26 times less risky than United Fire. It trades about 0.05 of its potential returns per unit of risk. United Fire Group is currently generating about 0.0 per unit of risk. If you would invest  7,240  in CVR Partners LP on December 18, 2024 and sell it today you would earn a total of  321.00  from holding CVR Partners LP or generate 4.43% return on investment over 90 days.

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

CVR Partners LP  vs.  United Fire Group

CVR Partners LP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CVR Partners is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 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 CVR Partners and United Fire

The main advantage of trading using opposite CVR Partners and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Partners 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 CVR Partners LP 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.