Correlation Between United Fire and Stifel Financial

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

Diversification Opportunities for United Fire and Stifel Financial

-0.32

Correlation Coefficient

United Fire  Stifel Financial

Very good diversification

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

Pair Corralation between United Fire and Stifel Financial

Given the investment horizon of 90 days United Fire Group is expected to under-perform the Stifel Financial. In addition to that, United Fire is 2.0 times more volatile than Stifel Financial Corp. It trades about -0.45 of its total potential returns per unit of risk. Stifel Financial Corp is currently generating about -0.05 per unit of volatility. If you would invest  2,509  in Stifel Financial Corp on October 9, 2024 and sell it today you would lose (17.00) from holding Stifel Financial Corp or give up 0.68% of portfolio value over 90 days.

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

United Fire Group  vs.  Stifel Financial Corp

United Fire Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 13 (%) 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.

Stifel Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stifel Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Fire and Stifel Financial

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

The idea behind United Fire Group and Stifel Financial Corp 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 CEOs Directory module to screen CEOs from public companies around the world.