Correlation Between United Fire and Loews Corp
Can any of the company-specific risk be diversified away by investing in both United Fire and Loews Corp 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 Loews Corp 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 Loews Corp, you can compare the effects of market volatilities on United Fire and Loews Corp 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 Loews Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Loews Corp.
Diversification Opportunities for United Fire and Loews Corp
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Loews is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of United Fire i.e., United Fire and Loews Corp go up and down completely randomly.
Pair Corralation between United Fire and Loews Corp
Given the investment horizon of 90 days United Fire Group is expected to under-perform the Loews Corp. In addition to that, United Fire is 1.73 times more volatile than Loews Corp. It trades about -0.01 of its total potential returns per unit of risk. Loews Corp is currently generating about 0.1 per unit of volatility. If you would invest 8,144 in Loews Corp on December 18, 2024 and sell it today you would earn a total of 550.00 from holding Loews Corp or generate 6.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
United Fire Group vs. Loews Corp
Performance |
Timeline |
United Fire Group |
Loews Corp |
United Fire and Loews Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Fire and Loews Corp
The main advantage of trading using opposite United Fire and Loews Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Loews Corp 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 Loews Corp will offset losses from the drop in Loews Corp's long position.United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
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Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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