Correlation Between United Fire and Tapestry

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

Diversification Opportunities for United Fire and Tapestry

0.92

Correlation Coefficient

United Fire  Tapestry

Almost no diversification

The 3 months correlation between United and Tapestry is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of United Fire i.e., United Fire and Tapestry go up and down completely randomly.

Pair Corralation between United Fire and Tapestry

Given the investment horizon of 90 days United Fire is expected to generate 1.82 times less return on investment than Tapestry. In addition to that, United Fire is 1.22 times more volatile than Tapestry. It trades about 0.06 of its total potential returns per unit of risk. Tapestry is currently generating about 0.13 per unit of volatility. If you would invest  3,541  in Tapestry on October 9, 2024 and sell it today you would earn a total of  3,195  from holding Tapestry or generate 90.23% return on investment over 90 days.

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

United Fire Group  vs.  Tapestry

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 weak fundamental indicators, United Fire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tapestry

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Fire and Tapestry

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

The idea behind United Fire Group and Tapestry 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.