Correlation Between Union Materials and Hanil Chemical
Can any of the company-specific risk be diversified away by investing in both Union Materials and Hanil Chemical 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 Union Materials and Hanil Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Materials Corp and Hanil Chemical Ind, you can compare the effects of market volatilities on Union Materials and Hanil Chemical 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 Union Materials with a short position of Hanil Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Hanil Chemical.
Diversification Opportunities for Union Materials and Hanil Chemical
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Union and Hanil is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind and Union Materials 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 Union Materials Corp are associated (or correlated) with Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of Union Materials i.e., Union Materials and Hanil Chemical go up and down completely randomly.
Pair Corralation between Union Materials and Hanil Chemical
Assuming the 90 days trading horizon Union Materials Corp is expected to generate 2.51 times more return on investment than Hanil Chemical. However, Union Materials is 2.51 times more volatile than Hanil Chemical Ind. It trades about 0.12 of its potential returns per unit of risk. Hanil Chemical Ind is currently generating about -0.3 per unit of risk. If you would invest 217,000 in Union Materials Corp on October 29, 2024 and sell it today you would earn a total of 10,500 from holding Union Materials Corp or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. Hanil Chemical Ind
Performance |
| Timeline |
| Union Materials Corp |
| Hanil Chemical Ind |
Union Materials and Hanil Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and Hanil Chemical
The main advantage of trading using opposite Union Materials and Hanil Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Hanil Chemical 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 Hanil Chemical will offset losses from the drop in Hanil Chemical's long position.| Union Materials vs. Jeju Beer Co | Union Materials vs. Netmarble Games Corp | Union Materials vs. Hanwha Chemical Corp | Union Materials vs. Daejung Chemicals Metals |
| Hanil Chemical vs. LG Chemicals | Hanil Chemical vs. POSCO Holdings | Hanil Chemical vs. Hanwha Solutions | Hanil Chemical vs. Lotte Chemical Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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