Correlation Between Alta Equipment and United Parks

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

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

Diversification Opportunities for Alta Equipment and United Parks

0.61

Correlation Coefficient

Alta Equipment  United Parks

Poor diversification

The 3 months correlation between Alta and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group 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 Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and United Parks go up and down completely randomly.

Pair Corralation between Alta Equipment and United Parks

Given the investment horizon of 90 days Alta Equipment Group is expected to generate 1.79 times more return on investment than United Parks. However, Alta Equipment is 1.79 times more volatile than United Parks Resorts. It trades about 0.08 of its potential returns per unit of risk. United Parks Resorts is currently generating about -0.21 per unit of risk. If you would invest  701.00  in Alta Equipment Group on October 26, 2024 and sell it today you would earn a total of  28.50  from holding Alta Equipment Group or generate 4.07% return on investment over 90 days.

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

Alta Equipment Group  vs.  United Parks Resorts

Alta Equipment Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

United Parks Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parks Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, United Parks is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alta Equipment and United Parks

The main advantage of trading using opposite Alta Equipment and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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 Alta Equipment Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..