Correlation Between Choil Aluminum and Union Materials
Can any of the company-specific risk be diversified away by investing in both Choil Aluminum and Union Materials 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 Choil Aluminum and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choil Aluminum and Union Materials Corp, you can compare the effects of market volatilities on Choil Aluminum and Union Materials 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 Choil Aluminum with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choil Aluminum and Union Materials.
Diversification Opportunities for Choil Aluminum and Union Materials
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Choil and Union is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Choil Aluminum and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and Choil Aluminum 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 Choil Aluminum are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Choil Aluminum i.e., Choil Aluminum and Union Materials go up and down completely randomly.
Pair Corralation between Choil Aluminum and Union Materials
Assuming the 90 days trading horizon Choil Aluminum is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, Choil Aluminum is 1.43 times less risky than Union Materials. The stock trades about -0.12 of its potential returns per unit of risk. The Union Materials Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 242,000 in Union Materials Corp on August 25, 2024 and sell it today you would lose (9,500) from holding Union Materials Corp or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choil Aluminum vs. Union Materials Corp
Performance |
| Timeline |
| Choil Aluminum |
| Union Materials Corp |
Choil Aluminum and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choil Aluminum and Union Materials
The main advantage of trading using opposite Choil Aluminum and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choil Aluminum position performs unexpectedly, Union Materials 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 Union Materials will offset losses from the drop in Union Materials' long position.| Choil Aluminum vs. Busan Industrial Co | Choil Aluminum vs. Busan Ind | Choil Aluminum vs. Mirae Asset Daewoo | Choil Aluminum vs. UNISEM Co |
| Union Materials vs. SK Chemicals Co | Union Materials vs. Kukdong Oil Chemicals | Union Materials vs. Choil Aluminum | Union Materials vs. Homecast CoLtd |
Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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