Correlation Between Cool and United Parks

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

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

Diversification Opportunities for Cool and United Parks

-0.48

Correlation Coefficient

Cool  United Parks

Very good diversification

The 3 months correlation between Cool and United is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cool Company 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 Cool 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 Cool Company 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 Cool i.e., Cool and United Parks go up and down completely randomly.

Pair Corralation between Cool and United Parks

Given the investment horizon of 90 days Cool Company is expected to under-perform the United Parks. In addition to that, Cool is 1.02 times more volatile than United Parks Resorts. It trades about -0.01 of its total potential returns per unit of risk. United Parks Resorts is currently generating about -0.01 per unit of volatility. If you would invest  6,323  in United Parks Resorts on October 23, 2024 and sell it today you would lose (1,100) from holding United Parks Resorts or give up 17.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.72%
Values	Daily Returns

Cool Company  vs.  United Parks Resorts

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cool and United Parks

The main advantage of trading using opposite Cool and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cool 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 Cool Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.