Correlation Between Mattel and United Parks

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

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

Diversification Opportunities for Mattel and United Parks

-0.14

Correlation Coefficient

Mattel  United Parks

Good diversification

The 3 months correlation between Mattel and United is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc 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 Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and United Parks go up and down completely randomly.

Pair Corralation between Mattel and United Parks

Considering the 90-day investment horizon Mattel Inc is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, Mattel Inc is 1.39 times less risky than United Parks. The stock trades about -0.12 of its potential returns per unit of risk. The United Parks Resorts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,694  in United Parks Resorts on October 11, 2024 and sell it today you would earn a total of  32.00  from holding United Parks Resorts or generate 0.56% return on investment over 90 days.

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

Mattel Inc  vs.  United Parks Resorts

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

United Parks Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, United Parks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mattel and United Parks

The main advantage of trading using opposite Mattel and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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 Mattel Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.