Correlation Between TFI International and United Parks

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

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

Diversification Opportunities for TFI International and United Parks

0.77

Correlation Coefficient

TFI International  United Parks

Poor diversification

The 3 months correlation between TFI and United is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TFI 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 TFI International 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 TFI 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 TFI International i.e., TFI International and United Parks go up and down completely randomly.

Pair Corralation between TFI International and United Parks

Given the investment horizon of 90 days TFI International is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, TFI International is 1.36 times less risky than United Parks. The stock trades about -0.24 of its potential returns per unit of risk. The United Parks Resorts is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,681  in United Parks Resorts on September 23, 2024 and sell it today you would lose (273.00) from holding United Parks Resorts or give up 4.81% of portfolio value over 90 days.

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

TFI International  vs.  United Parks Resorts

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with TFI International and United Parks

The main advantage of trading using opposite TFI International and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.