Correlation Between United Parks and Pacific West

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

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

Diversification Opportunities for United Parks and Pacific West

0.64

Correlation Coefficient

United Parks  Pacific West

Poor diversification

The 3 months correlation between United and Pacific is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp and United Parks 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 United Parks Resorts are associated (or correlated) with Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of United Parks i.e., United Parks and Pacific West go up and down completely randomly.

Pair Corralation between United Parks and Pacific West

Given the investment horizon of 90 days United Parks Resorts is expected to under-perform the Pacific West. In addition to that, United Parks is 1.15 times more volatile than Pacific West Bancorp. It trades about -0.01 of its total potential returns per unit of risk. Pacific West Bancorp is currently generating about 0.0 per unit of volatility. If you would invest  1,225  in Pacific West Bancorp on October 26, 2024 and sell it today you would lose (115.00) from holding Pacific West Bancorp or give up 9.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

United Parks Resorts  vs.  Pacific West Bancorp

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.

Pacific West Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with United Parks and Pacific West

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

The idea behind United Parks Resorts and Pacific West Bancorp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.