Correlation Between Union Materials and Automobile
Can any of the company-specific risk be diversified away by investing in both Union Materials and Automobile 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 Automobile 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 Automobile Pc, you can compare the effects of market volatilities on Union Materials and Automobile 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 Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Automobile.
Diversification Opportunities for Union Materials and Automobile
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Union and Automobile is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc 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 Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Union Materials i.e., Union Materials and Automobile go up and down completely randomly.
Pair Corralation between Union Materials and Automobile
Assuming the 90 days trading horizon Union Materials Corp is expected to generate 0.92 times more return on investment than Automobile. However, Union Materials Corp is 1.08 times less risky than Automobile. It trades about -0.01 of its potential returns per unit of risk. Automobile Pc is currently generating about -0.06 per unit of risk. If you would invest 263,000 in Union Materials Corp on September 19, 2024 and sell it today you would lose (30,000) from holding Union Materials Corp or give up 11.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. Automobile Pc
Performance |
| Timeline |
| Union Materials Corp |
| Automobile Pc |
Union Materials and Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and Automobile
The main advantage of trading using opposite Union Materials and Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Automobile 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 Automobile will offset losses from the drop in Automobile's long position.| Union Materials vs. Daou Data Corp | Union Materials vs. Solution Advanced Technology | Union Materials vs. Busan Industrial Co | Union Materials vs. Busan Ind |
| Automobile vs. Hyundai Engineering Plastics | Automobile vs. Union Materials Corp | Automobile vs. Hana Materials | Automobile vs. PI Advanced Materials |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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