Correlation Between Jeil Steel and Union Materials
Can any of the company-specific risk be diversified away by investing in both Jeil Steel 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 Jeil Steel and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeil Steel Mfg and Union Materials Corp, you can compare the effects of market volatilities on Jeil Steel 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 Jeil Steel with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeil Steel and Union Materials.
Diversification Opportunities for Jeil Steel and Union Materials
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jeil and Union is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Jeil Steel Mfg 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 Jeil Steel 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 Jeil Steel Mfg 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 Jeil Steel i.e., Jeil Steel and Union Materials go up and down completely randomly.
Pair Corralation between Jeil Steel and Union Materials
Assuming the 90 days trading horizon Jeil Steel Mfg is expected to generate 1.61 times more return on investment than Union Materials. However, Jeil Steel is 1.61 times more volatile than Union Materials Corp. It trades about 0.06 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.02 per unit of risk. If you would invest 200,500 in Jeil Steel Mfg on September 5, 2024 and sell it today you would earn a total of 9,000 from holding Jeil Steel Mfg or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jeil Steel Mfg vs. Union Materials Corp
Performance |
| Timeline |
| Jeil Steel Mfg |
| Union Materials Corp |
Jeil Steel and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeil Steel and Union Materials
The main advantage of trading using opposite Jeil Steel and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeil Steel 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.The idea behind Jeil Steel Mfg and Union Materials Corp 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.| Union Materials vs. Jeil Steel Mfg | Union Materials vs. Daehan Steel | Union Materials vs. Wireless Power Amplifier | Union Materials vs. Daishin Information Communications |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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