Correlation Between Unum and Stifel Financial

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

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

Diversification Opportunities for Unum and Stifel Financial

0.75

Correlation Coefficient

Unum  Stifel Financial

Poor diversification

The 3 months correlation between Unum and Stifel is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and Unum 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 Unum Group are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Unum i.e., Unum and Stifel Financial go up and down completely randomly.

Pair Corralation between Unum and Stifel Financial

Given the investment horizon of 90 days Unum Group is expected to under-perform the Stifel Financial. But the stock apears to be less risky and, when comparing its historical volatility, Unum Group is 1.23 times less risky than Stifel Financial. The stock trades about -0.21 of its potential returns per unit of risk. The Stifel Financial is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,357  in Stifel Financial on July 15, 2024 and sell it today you would lose (35.00) from holding Stifel Financial or give up 1.48% of portfolio value over 90 days.

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

Unum Group  vs.  Stifel Financial

Unum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Unum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Stifel Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Stifel Financial may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Unum and Stifel Financial

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

The idea behind Unum Group and Stifel Financial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.