Correlation Between Under Armour and Talon International

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

Diversification Opportunities for Under Armour and Talon International

0.26

Correlation Coefficient

Under Armour  Talon International

Modest diversification

The 3 months correlation between Under and Talon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Talon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon International 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 Talon International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon International has no effect on the direction of Under Armour i.e., Under Armour and Talon International go up and down completely randomly.

Pair Corralation between Under Armour and Talon International

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Talon International. But the stock apears to be less risky and, when comparing its historical volatility, Under Armour C is 3.41 times less risky than Talon International. The stock trades about -0.01 of its potential returns per unit of risk. The Talon International is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Talon International on October 11, 2024 and sell it today you would earn a total of  4.00  from holding Talon International or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.83%
Values	Daily Returns

Under Armour C  vs.  Talon International

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.

Talon International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Talon International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Under Armour and Talon International

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

The idea behind Under Armour C and Talon International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.