Correlation Between United Parks and RH

Can any of the company-specific risk be diversified away by investing in both United Parks and RH 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 RH 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 RH, you can compare the effects of market volatilities on United Parks and RH 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 RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parks and RH.

Diversification Opportunities for United Parks and RH

0.04

Correlation Coefficient

United Parks  RH

Significant diversification

The 3 months correlation between United and RH is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH 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 RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of United Parks i.e., United Parks and RH go up and down completely randomly.

Pair Corralation between United Parks and RH

Given the investment horizon of 90 days United Parks is expected to generate 28.64 times less return on investment than RH. But when comparing it to its historical volatility, United Parks Resorts is 1.87 times less risky than RH. It trades about 0.01 of its potential returns per unit of risk. RH is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  28,979  in RH on October 25, 2024 and sell it today you would earn a total of  14,494  from holding RH or generate 50.02% return on investment over 90 days.

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

United Parks Resorts  vs.  RH

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

RH

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parks and RH

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

The idea behind United Parks Resorts and RH 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.