Correlation Between United Fire and Wingstop

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

Diversification Opportunities for United Fire and Wingstop

0.17

Correlation Coefficient

United Fire  Wingstop

Average diversification

The 3 months correlation between United and Wingstop is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of United Fire i.e., United Fire and Wingstop go up and down completely randomly.

Pair Corralation between United Fire and Wingstop

Given the investment horizon of 90 days United Fire is expected to generate 3.8 times less return on investment than Wingstop. In addition to that, United Fire is 1.01 times more volatile than Wingstop. It trades about 0.03 of its total potential returns per unit of risk. Wingstop is currently generating about 0.12 per unit of volatility. If you would invest  36,452  in Wingstop on February 23, 2024 and sell it today you would earn a total of  1,491  from holding Wingstop or generate 4.09% return on investment over 90 days.

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

United Fire Group  vs.  Wingstop

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.

Wingstop

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wingstop are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wingstop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Fire and Wingstop

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

The idea behind United Fire Group and Wingstop 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.