Correlation Between Old Republic and United Parks

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

By analyzing existing cross correlation between Old Republic International and United Parks Resorts, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and United Parks.

Diversification Opportunities for Old Republic and United Parks

0.85

Correlation Coefficient

Old Republic  United Parks

Very poor diversification

The 3 months correlation between Old and United is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International 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 Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and United Parks go up and down completely randomly.

Pair Corralation between Old Republic and United Parks

Considering the 90-day investment horizon Old Republic International is expected to generate 0.63 times more return on investment than United Parks. However, Old Republic International is 1.58 times less risky than United Parks. It trades about -0.03 of its potential returns per unit of risk. United Parks Resorts is currently generating about -0.14 per unit of risk. If you would invest  3,707  in Old Republic International on September 15, 2024 and sell it today you would lose (28.00) from holding Old Republic International or give up 0.76% of portfolio value over 90 days.

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

Old Republic International  vs.  United Parks Resorts

Old Republic Interna

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

United Parks Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Old Republic and United Parks

The main advantage of trading using opposite Old Republic and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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 Old Republic International 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.