Correlation Between Under Armour and Superior Uniform

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

By analyzing existing cross correlation between Under Armour A and Superior Uniform Group, you can compare the effects of market volatilities on Under Armour and Superior Uniform 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 Superior Uniform. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Superior Uniform.

Diversification Opportunities for Under Armour and Superior Uniform

0.55

Correlation Coefficient

Under Armour  Superior Uniform

Very weak diversification

The 3 months correlation between Under and Superior is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour A and Superior Uniform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Uniform 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 A are associated (or correlated) with Superior Uniform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Uniform has no effect on the direction of Under Armour i.e., Under Armour and Superior Uniform go up and down completely randomly.

Pair Corralation between Under Armour and Superior Uniform

Considering the 90-day investment horizon Under Armour A is expected to under-perform the Superior Uniform. In addition to that, Under Armour is 1.37 times more volatile than Superior Uniform Group. It trades about -0.14 of its total potential returns per unit of risk. Superior Uniform Group is currently generating about -0.06 per unit of volatility. If you would invest  1,664  in Superior Uniform Group on October 23, 2024 and sell it today you would lose (86.00) from holding Superior Uniform Group or give up 5.17% of portfolio value over 90 days.

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

Under Armour A  vs.  Superior Uniform Group

Under Armour A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour A 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Superior Uniform

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Uniform Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Superior Uniform may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Under Armour and Superior Uniform

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

The idea behind Under Armour A and Superior Uniform Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.