Correlation Between Union Materials and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both Union Materials and Industrial Bank 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 Industrial Bank 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 Industrial Bank, you can compare the effects of market volatilities on Union Materials and Industrial Bank 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 Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Industrial Bank.
Diversification Opportunities for Union Materials and Industrial Bank
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Union and Industrial is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Union Materials i.e., Union Materials and Industrial Bank go up and down completely randomly.
Pair Corralation between Union Materials and Industrial Bank
Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Industrial Bank. In addition to that, Union Materials is 2.29 times more volatile than Industrial Bank. It trades about -0.03 of its total potential returns per unit of risk. Industrial Bank is currently generating about 0.03 per unit of volatility. If you would invest 1,488,000 in Industrial Bank on October 30, 2024 and sell it today you would earn a total of 19,000 from holding Industrial Bank or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. Industrial Bank
Performance |
| Timeline |
| Union Materials Corp |
| Industrial Bank |
Union Materials and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and Industrial Bank
The main advantage of trading using opposite Union Materials and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.| Union Materials vs. Aprogen Healthcare Games | Union Materials vs. LG Household Healthcare | Union Materials vs. Ssangyong Information Communication | Union Materials vs. Digital Power Communications |
| Industrial Bank vs. BIT Computer Co | Industrial Bank vs. V One Tech Co | Industrial Bank vs. KMH Hitech Co | Industrial Bank vs. Dongwoon Anatech Co |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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