Correlation Between AZZ Incorporated and Unifirst

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

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

Diversification Opportunities for AZZ Incorporated and Unifirst

0.33

Correlation Coefficient

AZZ Incorporated  Unifirst

Weak diversification

The 3 months correlation between AZZ and Unifirst is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and Unifirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unifirst and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with Unifirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unifirst has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and Unifirst go up and down completely randomly.

Pair Corralation between AZZ Incorporated and Unifirst

Considering the 90-day investment horizon AZZ Incorporated is expected to generate 1.97 times less return on investment than Unifirst. But when comparing it to its historical volatility, AZZ Incorporated is 1.61 times less risky than Unifirst. It trades about 0.04 of its potential returns per unit of risk. Unifirst is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,051  in Unifirst on November 28, 2024 and sell it today you would earn a total of  1,291  from holding Unifirst or generate 6.44% return on investment over 90 days.

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

AZZ Incorporated  vs.  Unifirst

AZZ Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, AZZ Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Unifirst

Risk-Adjusted Performance

Insignificant

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

Pair Trading with AZZ Incorporated and Unifirst

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

The idea behind AZZ Incorporated and Unifirst 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.