Correlation Between United Fire and Maiden Holdings
Can any of the company-specific risk be diversified away by investing in both United Fire and Maiden Holdings 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 Maiden Holdings 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 Maiden Holdings, you can compare the effects of market volatilities on United Fire and Maiden Holdings 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 Maiden Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Maiden Holdings.
Diversification Opportunities for United Fire and Maiden Holdings
0.07 | Correlation Coefficient |
Significant diversification
The 9 months correlation between United and Maiden is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Maiden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maiden Holdings 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 Maiden Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maiden Holdings has no effect on the direction of United Fire i.e., United Fire and Maiden Holdings go up and down completely randomly.
Pair Corralation between United Fire and Maiden Holdings
Given the investment horizon of 90 days United Fire Group is expected to generate 1.1 times more return on investment than Maiden Holdings. However, United Fire is 1.1 times more volatile than Maiden Holdings. It trades about 0.04 of its potential returns per unit of risk. Maiden Holdings is currently generating about 0.01 per unit of risk. If you would invest 2,102 in United Fire Group on February 24, 2024 and sell it today you would earn a total of 159.00 from holding United Fire Group or generate 7.56% return on investment over 90 days.
Time Period | 9 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
United Fire Group vs. Maiden Holdings
Performance |
Timeline |
United Fire Group |
Maiden Holdings |
United Fire and Maiden Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Fire and Maiden Holdings
The main advantage of trading using opposite United Fire and Maiden Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Maiden Holdings 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 Maiden Holdings will offset losses from the drop in Maiden Holdings' long position.United Fire vs. OReilly Automotive | United Fire vs. Medical Equipment And | United Fire vs. SeerInc | United Fire vs. Orla Mining |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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