Correlation Between Unifi and Toray Industries

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

By analyzing existing cross correlation between Unifi Inc and Toray Industries ADR, you can compare the effects of market volatilities on Unifi and Toray Industries 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 Unifi with a short position of Toray Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unifi and Toray Industries.

Diversification Opportunities for Unifi and Toray Industries

-0.46

Correlation Coefficient

Unifi  Toray Industries

Very good diversification

The 3 months correlation between Unifi and Toray is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Unifi Inc and Toray Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries ADR and Unifi 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 Unifi Inc are associated (or correlated) with Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries ADR has no effect on the direction of Unifi i.e., Unifi and Toray Industries go up and down completely randomly.

Pair Corralation between Unifi and Toray Industries

Considering the 90-day investment horizon Unifi Inc is expected to under-perform the Toray Industries. In addition to that, Unifi is 1.42 times more volatile than Toray Industries ADR. It trades about -0.06 of its total potential returns per unit of risk. Toray Industries ADR is currently generating about 0.09 per unit of volatility. If you would invest  1,260  in Toray Industries ADR on December 28, 2024 and sell it today you would earn a total of  142.00  from holding Toray Industries ADR or generate 11.27% return on investment over 90 days.

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

Unifi Inc  vs.  Toray Industries ADR

Unifi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unifi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Toray Industries ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Toray Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unifi and Toray Industries

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

The idea behind Unifi Inc and Toray Industries ADR 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.