Correlation Between Maiden Holdings and United Fire

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

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

Diversification Opportunities for Maiden Holdings and United Fire

-0.65

Correlation Coefficient

Maiden Holdings  United Fire

Excellent diversification

The 3 months correlation between Maiden and United is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Maiden Holdings and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group and Maiden Holdings 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 Maiden Holdings are associated (or correlated) with United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Maiden Holdings i.e., Maiden Holdings and United Fire go up and down completely randomly.

Pair Corralation between Maiden Holdings and United Fire

Given the investment horizon of 90 days Maiden Holdings is expected to generate 1.16 times more return on investment than United Fire. However, Maiden Holdings is 1.16 times more volatile than United Fire Group. It trades about 0.01 of its potential returns per unit of risk. United Fire Group is currently generating about -0.01 per unit of risk. If you would invest  1,552  in Maiden Holdings on February 23, 2024 and sell it today you would lose (30.00) from holding Maiden Holdings or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Maiden Holdings  vs.  United Fire Group

Maiden Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maiden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Fire Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Fire Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, United Fire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Maiden Holdings and United Fire

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

The idea behind Maiden Holdings and United Fire Group 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.