Correlation Between Union Materials and Busan Industrial
Can any of the company-specific risk be diversified away by investing in both Union Materials and Busan Industrial 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 Busan Industrial 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 Busan Industrial Co, you can compare the effects of market volatilities on Union Materials and Busan Industrial 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 Busan Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Busan Industrial.
Diversification Opportunities for Union Materials and Busan Industrial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Union and Busan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial 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 Busan Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Industrial has no effect on the direction of Union Materials i.e., Union Materials and Busan Industrial go up and down completely randomly.
Pair Corralation between Union Materials and Busan Industrial
Assuming the 90 days trading horizon Union Materials is expected to generate 6.96 times less return on investment than Busan Industrial. But when comparing it to its historical volatility, Union Materials Corp is 2.22 times less risky than Busan Industrial. It trades about 0.03 of its potential returns per unit of risk. Busan Industrial Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,600,000 in Busan Industrial Co on September 1, 2024 and sell it today you would earn a total of 540,000 from holding Busan Industrial Co or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. Busan Industrial Co
Performance |
| Timeline |
| Union Materials Corp |
| Busan Industrial |
Union Materials and Busan Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and Busan Industrial
The main advantage of trading using opposite Union Materials and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Busan Industrial 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 Busan Industrial will offset losses from the drop in Busan Industrial's long position.| Union Materials vs. LG Display | Union Materials vs. Hyundai Motor | Union Materials vs. Hyundai Motor Co | Union Materials vs. Hyundai Motor Co |
| Busan Industrial vs. AptaBio Therapeutics | Busan Industrial vs. Daewoo SBI SPAC | Busan Industrial vs. Dream Security co | Busan Industrial vs. Microfriend |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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