Correlation Between Unifirst and Maximus

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

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

Diversification Opportunities for Unifirst and Maximus

0.69

Correlation Coefficient

Unifirst  Maximus

Poor diversification

The 3 months correlation between Unifirst and Maximus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Unifirst and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus 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 Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Unifirst i.e., Unifirst and Maximus go up and down completely randomly.

Pair Corralation between Unifirst and Maximus

Considering the 90-day investment horizon Unifirst is expected to generate 1.71 times more return on investment than Maximus. However, Unifirst is 1.71 times more volatile than Maximus. It trades about 0.07 of its potential returns per unit of risk. Maximus is currently generating about 0.04 per unit of risk. If you would invest  16,075  in Unifirst on August 2, 2024 and sell it today you would earn a total of  2,356  from holding Unifirst or generate 14.66% return on investment over 90 days.

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

Unifirst  vs.  Maximus

Unifirst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unifirst has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Unifirst is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Maximus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Maximus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Unifirst and Maximus

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

The idea behind Unifirst and Maximus 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.