Correlation Between United Fire and Global E

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

Diversification Opportunities for United Fire and Global E

-0.03

Correlation Coefficient

United Fire  Global E

Good diversification

The 3 months correlation between United and Global is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online 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 Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of United Fire i.e., United Fire and Global E go up and down completely randomly.

Pair Corralation between United Fire and Global E

Given the investment horizon of 90 days United Fire Group is expected to generate 0.54 times more return on investment than Global E. However, United Fire Group is 1.84 times less risky than Global E. It trades about 0.16 of its potential returns per unit of risk. Global E Online is currently generating about -0.1 per unit of risk. If you would invest  2,181  in United Fire Group on February 3, 2024 and sell it today you would earn a total of  112.00  from holding United Fire Group or generate 5.14% return on investment over 90 days.

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

United Fire Group  vs.  Global E Online

United Fire Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, United Fire may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Global E Online

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global E Online has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with United Fire and Global E

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

The idea behind United Fire Group and Global E Online 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.