Correlation Between Union Materials and INNOX Advanced
Can any of the company-specific risk be diversified away by investing in both Union Materials and INNOX Advanced 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 INNOX Advanced 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 INNOX Advanced Materials, you can compare the effects of market volatilities on Union Materials and INNOX Advanced 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 INNOX Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and INNOX Advanced.
Diversification Opportunities for Union Materials and INNOX Advanced
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Union and INNOX is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and INNOX Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOX Advanced Materials 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 INNOX Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOX Advanced Materials has no effect on the direction of Union Materials i.e., Union Materials and INNOX Advanced go up and down completely randomly.
Pair Corralation between Union Materials and INNOX Advanced
Assuming the 90 days trading horizon Union Materials Corp is expected to generate 1.08 times more return on investment than INNOX Advanced. However, Union Materials is 1.08 times more volatile than INNOX Advanced Materials. It trades about -0.03 of its potential returns per unit of risk. INNOX Advanced Materials is currently generating about -0.06 per unit of risk. If you would invest 287,500 in Union Materials Corp on August 27, 2024 and sell it today you would lose (55,000) from holding Union Materials Corp or give up 19.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Materials Corp vs. INNOX Advanced Materials
Performance |
| Timeline |
| Union Materials Corp |
| INNOX Advanced Materials |
Union Materials and INNOX Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Materials and INNOX Advanced
The main advantage of trading using opposite Union Materials and INNOX Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, INNOX Advanced 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 INNOX Advanced will offset losses from the drop in INNOX Advanced's long position.| Union Materials vs. Busan Industrial Co | Union Materials vs. Busan Ind | Union Materials vs. Mirae Asset Daewoo | Union Materials vs. UNISEM Co |
| INNOX Advanced vs. SK Hynix | INNOX Advanced vs. People Technology | INNOX Advanced vs. SIMMTECH Co | INNOX Advanced vs. Haesung DS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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