Correlation Between United Fire and Corporacion America

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

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

Diversification Opportunities for United Fire and Corporacion America

0.67

Correlation Coefficient

United Fire  Corporacion America

Poor diversification

The 3 months correlation between United and Corporacion is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America and United Fire 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 United Fire Group are associated (or correlated) with Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of United Fire i.e., United Fire and Corporacion America go up and down completely randomly.

Pair Corralation between United Fire and Corporacion America

Given the investment horizon of 90 days United Fire Group is expected to under-perform the Corporacion America. But the stock apears to be less risky and, when comparing its historical volatility, United Fire Group is 1.65 times less risky than Corporacion America. The stock trades about -0.14 of its potential returns per unit of risk. The Corporacion America Airports is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,872  in Corporacion America Airports on September 24, 2024 and sell it today you would earn a total of  16.00  from holding Corporacion America Airports or generate 0.85% return on investment over 90 days.

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

United Fire Group  vs.  Corporacion America Airports

United Fire Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, United Fire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Corporacion America

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Fire and Corporacion America

The main advantage of trading using opposite United Fire and Corporacion America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Corporacion America 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 Corporacion America will offset losses from the drop in Corporacion America's long position.

The idea behind United Fire Group and Corporacion America Airports 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..