Correlation Between Superior Plus and UFP Industries

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

By analyzing existing cross correlation between Superior Plus Corp and UFP Industries, you can compare the effects of market volatilities on Superior Plus and UFP Industries 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 Superior Plus with a short position of UFP Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and UFP Industries.

Diversification Opportunities for Superior Plus and UFP Industries

-0.51

Correlation Coefficient

Superior Plus  UFP Industries

Excellent diversification

The 3 months correlation between Superior and UFP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and UFP Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFP Industries and Superior Plus 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 Superior Plus Corp are associated (or correlated) with UFP Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFP Industries has no effect on the direction of Superior Plus i.e., Superior Plus and UFP Industries go up and down completely randomly.

Pair Corralation between Superior Plus and UFP Industries

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the UFP Industries. In addition to that, Superior Plus is 1.64 times more volatile than UFP Industries. It trades about -0.04 of its total potential returns per unit of risk. UFP Industries is currently generating about 0.13 per unit of volatility. If you would invest  10,885  in UFP Industries on September 3, 2024 and sell it today you would earn a total of  1,800  from holding UFP Industries or generate 16.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  UFP Industries

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

UFP Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UFP Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, UFP Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and UFP Industries

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

The idea behind Superior Plus Corp and UFP Industries 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.