Correlation Between United Parks and Tokyo Electron

Can any of the company-specific risk be diversified away by investing in both United Parks and Tokyo Electron 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 Tokyo Electron 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 Tokyo Electron, you can compare the effects of market volatilities on United Parks and Tokyo Electron 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 Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parks and Tokyo Electron.

Diversification Opportunities for United Parks and Tokyo Electron

-0.66

Correlation Coefficient

United Parks  Tokyo Electron

Excellent diversification

The 3 months correlation between United and Tokyo is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of United Parks i.e., United Parks and Tokyo Electron go up and down completely randomly.

Pair Corralation between United Parks and Tokyo Electron

Given the investment horizon of 90 days United Parks Resorts is expected to generate 0.64 times more return on investment than Tokyo Electron. However, United Parks Resorts is 1.57 times less risky than Tokyo Electron. It trades about 0.06 of its potential returns per unit of risk. Tokyo Electron is currently generating about -0.05 per unit of risk. If you would invest  5,087  in United Parks Resorts on September 24, 2024 and sell it today you would earn a total of  321.00  from holding United Parks Resorts or generate 6.31% return on investment over 90 days.

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

United Parks Resorts  vs.  Tokyo Electron

United Parks Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with United Parks and Tokyo Electron

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

The idea behind United Parks Resorts and Tokyo Electron 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.