Correlation Between Dream Finders and United Fire
Can any of the company-specific risk be diversified away by investing in both Dream Finders 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 Dream Finders and United Fire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dream Finders HomesInc and United Fire Group, you can compare the effects of market volatilities on Dream Finders 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 Dream Finders with a short position of United Fire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Finders and United Fire.
Diversification Opportunities for Dream Finders and United Fire
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dream and United is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dream Finders HomesInc 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 Dream Finders 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 Dream Finders HomesInc 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 Dream Finders i.e., Dream Finders and United Fire go up and down completely randomly.
Pair Corralation between Dream Finders and United Fire
Considering the 90-day investment horizon Dream Finders HomesInc is expected to generate 1.37 times more return on investment than United Fire. However, Dream Finders is 1.37 times more volatile than United Fire Group. It trades about 0.07 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 1,681 in Dream Finders HomesInc on December 30, 2023 and sell it today you would earn a total of 2,692 from holding Dream Finders HomesInc or generate 160.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dream Finders HomesInc vs. United Fire Group
Performance |
Timeline |
Dream Finders HomesInc |
United Fire Group |
Dream Finders and United Fire Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dream Finders and United Fire
The main advantage of trading using opposite Dream Finders and United Fire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Finders 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.Dream Finders vs. Green Brick Partners | Dream Finders vs. Century Communities | Dream Finders vs. Installed Building Products |
United Fire vs. Chubb | United Fire vs. NI Holdings | United Fire vs. American Financial Group | United Fire vs. Caterpillar |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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