Correlation Between United Parks and Union Electric
Can any of the company-specific risk be diversified away by investing in both United Parks and Union Electric 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 Parks and Union Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parks Resorts and Union Electric, you can compare the effects of market volatilities on United Parks and Union Electric 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 Parks with a short position of Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parks and Union Electric.
Diversification Opportunities for United Parks and Union Electric
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Union is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric and United Parks 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 Parks Resorts are associated (or correlated) with Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of United Parks i.e., United Parks and Union Electric go up and down completely randomly.
Pair Corralation between United Parks and Union Electric
Given the investment horizon of 90 days United Parks Resorts is expected to generate 0.74 times more return on investment than Union Electric. However, United Parks Resorts is 1.35 times less risky than Union Electric. It trades about 0.25 of its potential returns per unit of risk. Union Electric is currently generating about 0.17 per unit of risk. If you would invest 5,257 in United Parks Resorts on September 2, 2024 and sell it today you would earn a total of 607.00 from holding United Parks Resorts or generate 11.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Parks Resorts vs. Union Electric
Performance |
| Timeline |
| United Parks Resorts |
| Union Electric |
United Parks and Union Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parks and Union Electric
The main advantage of trading using opposite United Parks and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parks position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.The idea behind United Parks Resorts and Union Electric 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.| Union Electric vs. FormFactor | Union Electric vs. United Parks Resorts | Union Electric vs. Entegris | Union Electric vs. Canlan Ice Sports |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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