Correlation Between Universal and United Parks
Can any of the company-specific risk be diversified away by investing in both Universal 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 Universal and United Parks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal and United Parks Resorts, you can compare the effects of market volatilities on Universal 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 Universal with a short position of United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and United Parks.
Diversification Opportunities for Universal and United Parks
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and United is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal i.e., Universal and United Parks go up and down completely randomly.
Pair Corralation between Universal and United Parks
Considering the 90-day investment horizon Universal is expected to generate 7.73 times less return on investment than United Parks. But when comparing it to its historical volatility, Universal is 1.27 times less risky than United Parks. It trades about 0.01 of its potential returns per unit of risk. United Parks Resorts is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,904 in United Parks Resorts on August 29, 2024 and sell it today you would earn a total of 819.00 from holding United Parks Resorts or generate 16.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal vs. United Parks Resorts
Performance |
| Timeline |
| Universal |
| United Parks Resorts |
Universal and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal and United Parks
The main advantage of trading using opposite Universal and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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.| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
| United Parks vs. Park Ohio Holdings | United Parks vs. MYR Group | United Parks vs. Aris Water Solutions | United Parks vs. Kinetik Holdings |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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