Correlation Between Under Armour and Transocean

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

By analyzing existing cross correlation between Under Armour C and Transocean, you can compare the effects of market volatilities on Under Armour and Transocean 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 Under Armour with a short position of Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Transocean.

Diversification Opportunities for Under Armour and Transocean

0.31

Correlation Coefficient

Under Armour  Transocean

Weak diversification

The 3 months correlation between Under and Transocean is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Under Armour 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 Under Armour C are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Under Armour i.e., Under Armour and Transocean go up and down completely randomly.

Pair Corralation between Under Armour and Transocean

Allowing for the 90-day total investment horizon Under Armour C is expected to generate 1.47 times more return on investment than Transocean. However, Under Armour is 1.47 times more volatile than Transocean. It trades about -0.23 of its potential returns per unit of risk. Transocean is currently generating about -0.46 per unit of risk. If you would invest  877.00  in Under Armour C on September 27, 2024 and sell it today you would lose (119.00) from holding Under Armour C or give up 13.57% of portfolio value over 90 days.

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

Under Armour C  vs.  Transocean

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Under Armour is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Under Armour and Transocean

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

The idea behind Under Armour C and Transocean 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.