Correlation Between Unum and Globe Life

Can any of the company-specific risk be diversified away by investing in both Unum and Globe Life 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 Unum and Globe Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unum Group and Globe Life, you can compare the effects of market volatilities on Unum and Globe Life 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 Unum with a short position of Globe Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unum and Globe Life.

Diversification Opportunities for Unum and Globe Life

0.6

Correlation Coefficient

Unum  Globe Life

Poor diversification

The 3 months correlation between Unum and Globe is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and Globe Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life and Unum 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 Unum Group are associated (or correlated) with Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life has no effect on the direction of Unum i.e., Unum and Globe Life go up and down completely randomly.

Pair Corralation between Unum and Globe Life

Considering the 90-day investment horizon Unum is expected to generate 7.23 times less return on investment than Globe Life. But when comparing it to its historical volatility, Unum Group is 1.2 times less risky than Globe Life. It trades about 0.02 of its potential returns per unit of risk. Globe Life is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  11,100  in Globe Life on November 29, 2024 and sell it today you would earn a total of  1,093  from holding Globe Life or generate 9.85% return on investment over 90 days.

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

Unum Group  vs.  Globe Life

Unum Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unum Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Unum is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Globe Life

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Life are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Globe Life may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Unum and Globe Life

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

The idea behind Unum Group and Globe Life 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.