Correlation Between Lear and United Parks
Can any of the company-specific risk be diversified away by investing in both Lear and United Parks 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 Lear and United Parks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lear Corporation and United Parks Resorts, you can compare the effects of market volatilities on Lear and United Parks 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 Lear with a short position of United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and United Parks.
Diversification Opportunities for Lear and United Parks
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lear and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts and Lear 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 Lear Corporation are associated (or correlated) with United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Lear i.e., Lear and United Parks go up and down completely randomly.
Pair Corralation between Lear and United Parks
Considering the 90-day investment horizon Lear Corporation is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, Lear Corporation is 1.29 times less risky than United Parks. The stock trades about -0.02 of its potential returns per unit of risk. The United Parks Resorts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,272 in United Parks Resorts on August 30, 2024 and sell it today you would earn a total of 535.00 from holding United Parks Resorts or generate 10.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lear Corp. vs. United Parks Resorts
Performance |
| Timeline |
| Lear |
| United Parks Resorts |
Lear and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lear and United Parks
The main advantage of trading using opposite Lear and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lear position performs unexpectedly, United Parks 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 Parks will offset losses from the drop in United Parks' long position.The idea behind Lear Corporation and United Parks Resorts 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.| United Parks vs. Chipotle Mexican Grill | United Parks vs. Yum Brands | United Parks vs. The Wendys Co | United Parks vs. McDonalds |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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