Correlation Between Unifirst and AZZ Incorporated

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

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

Diversification Opportunities for Unifirst and AZZ Incorporated

0.78

Correlation Coefficient

Unifirst  AZZ Incorporated

Poor diversification

The 3 months correlation between Unifirst and AZZ is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Unifirst and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and Unifirst 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 Unifirst are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Unifirst i.e., Unifirst and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Unifirst and AZZ Incorporated

Considering the 90-day investment horizon Unifirst is expected to generate 1.39 times less return on investment than AZZ Incorporated. But when comparing it to its historical volatility, Unifirst is 1.24 times less risky than AZZ Incorporated. It trades about 0.07 of its potential returns per unit of risk. AZZ Incorporated is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,299  in AZZ Incorporated on August 30, 2024 and sell it today you would earn a total of  816.00  from holding AZZ Incorporated or generate 9.83% return on investment over 90 days.

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

Unifirst  vs.  AZZ Incorporated

Unifirst

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unifirst are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Unifirst may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AZZ Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Unifirst and AZZ Incorporated

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

The idea behind Unifirst and AZZ Incorporated 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 Commodity Directory module to find actively traded commodities issued by global exchanges.