Correlation Between United Fire and Primerica

Can any of the company-specific risk be diversified away by investing in both United Fire and Primerica 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 Primerica 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 Primerica, you can compare the effects of market volatilities on United Fire and Primerica 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 Primerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Primerica.

Diversification Opportunities for United Fire and Primerica

0.32

Correlation Coefficient

United Fire  Primerica

Weak diversification

The 3 months correlation between United and Primerica is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Primerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primerica 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 Primerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primerica has no effect on the direction of United Fire i.e., United Fire and Primerica go up and down completely randomly.

Pair Corralation between United Fire and Primerica

Given the investment horizon of 90 days United Fire is expected to generate 1.39 times less return on investment than Primerica. In addition to that, United Fire is 1.88 times more volatile than Primerica. It trades about 0.03 of its total potential returns per unit of risk. Primerica is currently generating about 0.09 per unit of volatility. If you would invest  19,400  in Primerica on October 22, 2024 and sell it today you would earn a total of  9,814  from holding Primerica or generate 50.59% return on investment over 90 days.

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

United Fire Group  vs.  Primerica

United Fire Group

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 11 (%) 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.

Primerica

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Primerica are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Primerica is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with United Fire and Primerica

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

The idea behind United Fire Group and Primerica 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.