Correlation Between Union Materials and Finebesteel
Can any of the company-specific risk be diversified away by investing in both Union Materials and Finebesteel 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 Finebesteel 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 Finebesteel, you can compare the effects of market volatilities on Union Materials and Finebesteel 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 Finebesteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Finebesteel.
Diversification Opportunities for Union Materials and Finebesteel
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Union and Finebesteel is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel 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 Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Union Materials i.e., Union Materials and Finebesteel go up and down completely randomly.
Pair Corralation between Union Materials and Finebesteel
Assuming the 90 days trading horizon Union Materials Corp is expected to generate 1.44 times more return on investment than Finebesteel. However, Union Materials is 1.44 times more volatile than Finebesteel. It trades about 0.02 of its potential returns per unit of risk. Finebesteel is currently generating about -0.04 per unit of risk. If you would invest 251,500 in Union Materials Corp on October 13, 2024 and sell it today you would lose (9,500) from holding Union Materials Corp or give up 3.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. Finebesteel
Performance |
| Timeline |
| Union Materials Corp |
| Finebesteel |
Union Materials and Finebesteel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and Finebesteel
The main advantage of trading using opposite Union Materials and Finebesteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Finebesteel 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 Finebesteel will offset losses from the drop in Finebesteel's long position.| Union Materials vs. AptaBio Therapeutics | Union Materials vs. Cytogen | Union Materials vs. Woori Technology Investment | Union Materials vs. ABL Bio |
| Finebesteel vs. LS Materials | Finebesteel vs. Union Materials Corp | Finebesteel vs. Hana Materials | Finebesteel vs. Daou Data 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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