Correlation Between Insung Information and Union Materials

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Can any of the company-specific risk be diversified away by investing in both Insung Information 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 Insung Information and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insung Information Co and Union Materials Corp, you can compare the effects of market volatilities on Insung Information 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 Insung Information with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insung Information and Union Materials.

Diversification Opportunities for Insung Information and Union Materials

InsungUnionDiversified AwayInsungUnionDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Insung and Union is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Insung Information Co 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 Insung Information 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 Insung Information Co 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 Insung Information i.e., Insung Information and Union Materials go up and down completely randomly.

Pair Corralation between Insung Information and Union Materials

Assuming the 90 days trading horizon Insung Information is expected to generate 2.31 times less return on investment than Union Materials. But when comparing it to its historical volatility, Insung Information Co is 1.96 times less risky than Union Materials. It trades about 0.01 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  230,500  in Union Materials Corp on November 20, 2024 and sell it today you would lose (500.00) from holding Union Materials Corp or give up 0.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Insung Information Co  vs.  Union Materials Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15033230 047400
       Timeline  
Insung Information 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Insung Information Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Insung Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1,6001,7001,8001,9002,0002,100
Union Materials Corp 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2,1002,2002,3002,4002,5002,6002,700

Insung Information and Union Materials Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.94-6.69-4.45-2.210.02.24.476.749.0111.28 0.0200.0250.0300.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15033230 047400
       Returns  

Pair Trading with Insung Information and Union Materials

The main advantage of trading using opposite Insung Information and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insung Information 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 Insung Information Co 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.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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