Correlation Between ECD Automotive and United Parks

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

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

Diversification Opportunities for ECD Automotive and United Parks

0.83

Correlation Coefficient

ECD Automotive  United Parks

Very poor diversification

The 3 months correlation between ECD and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design 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 ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and United Parks go up and down completely randomly.

Pair Corralation between ECD Automotive and United Parks

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the United Parks. In addition to that, ECD Automotive is 2.2 times more volatile than United Parks Resorts. It trades about -0.11 of its total potential returns per unit of risk. United Parks Resorts is currently generating about -0.09 per unit of volatility. If you would invest  5,543  in United Parks Resorts on December 27, 2024 and sell it today you would lose (750.00) from holding United Parks Resorts or give up 13.53% of portfolio value over 90 days.

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

ECD Automotive Design  vs.  United Parks Resorts

ECD Automotive Design

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

United Parks Resorts

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ECD Automotive and United Parks

The main advantage of trading using opposite ECD Automotive and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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 ECD Automotive Design 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.