Correlation Between Under Armour and Treatt Plc

Can any of the company-specific risk be diversified away by investing in both Under Armour and Treatt Plc 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 Under Armour and Treatt Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Under Armour C and Treatt plc, you can compare the effects of market volatilities on Under Armour and Treatt Plc 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 Under Armour with a short position of Treatt Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Treatt Plc.

Diversification Opportunities for Under Armour and Treatt Plc

-0.38

Correlation Coefficient

Under Armour  Treatt Plc

Very good diversification

The 3 months correlation between Under and Treatt is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Treatt plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treatt plc and Under Armour 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 Under Armour C are associated (or correlated) with Treatt Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treatt plc has no effect on the direction of Under Armour i.e., Under Armour and Treatt Plc go up and down completely randomly.

Pair Corralation between Under Armour and Treatt Plc

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Treatt Plc. In addition to that, Under Armour is 1.44 times more volatile than Treatt plc. It trades about 0.0 of its total potential returns per unit of risk. Treatt plc is currently generating about 0.01 per unit of volatility. If you would invest  616.00  in Treatt plc on September 28, 2024 and sell it today you would lose (1.00) from holding Treatt plc or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Under Armour C  vs.  Treatt plc

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Under Armour is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Treatt plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treatt plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Treatt Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Under Armour and Treatt Plc

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

The idea behind Under Armour C and Treatt plc 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.