Correlation Between United Fire and CROWN

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

Diversification Opportunities for United Fire and CROWN

-0.36

Correlation Coefficient

United Fire  CROWN

Very good diversification

The 3 months correlation between United and CROWN is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and CROWN CASTLE INTERNATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CROWN CASTLE INTERNA 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 CROWN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CROWN CASTLE INTERNA has no effect on the direction of United Fire i.e., United Fire and CROWN go up and down completely randomly.

Pair Corralation between United Fire and CROWN

Given the investment horizon of 90 days United Fire Group is expected to under-perform the CROWN. But the stock apears to be less risky and, when comparing its historical volatility, United Fire Group is 1.73 times less risky than CROWN. The stock trades about -0.21 of its potential returns per unit of risk. The CROWN CASTLE INTERNATIONAL is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,523  in CROWN CASTLE INTERNATIONAL on October 22, 2024 and sell it today you would earn a total of  718.00  from holding CROWN CASTLE INTERNATIONAL or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

United Fire Group  vs.  CROWN CASTLE INTERNATIONAL

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.

CROWN CASTLE INTERNA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CROWN CASTLE INTERNATIONAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CROWN may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Fire and CROWN

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

The idea behind United Fire Group and CROWN CASTLE INTERNATIONAL 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.