Correlation Between UIL and Iljin Materials
Can any of the company-specific risk be diversified away by investing in both UIL and Iljin Materials 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 UIL and Iljin Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UIL Co and Iljin Materials Co, you can compare the effects of market volatilities on UIL and Iljin Materials 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 UIL with a short position of Iljin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of UIL and Iljin Materials.
Diversification Opportunities for UIL and Iljin Materials
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UIL and Iljin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding UIL Co and Iljin Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iljin Materials and UIL 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 UIL Co are associated (or correlated) with Iljin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iljin Materials has no effect on the direction of UIL i.e., UIL and Iljin Materials go up and down completely randomly.
Pair Corralation between UIL and Iljin Materials
Assuming the 90 days trading horizon UIL Co is expected to generate 0.7 times more return on investment than Iljin Materials. However, UIL Co is 1.42 times less risky than Iljin Materials. It trades about -0.11 of its potential returns per unit of risk. Iljin Materials Co is currently generating about -0.15 per unit of risk. If you would invest 631,000 in UIL Co on September 3, 2024 and sell it today you would lose (194,500) from holding UIL Co or give up 30.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UIL Co vs. Iljin Materials Co
Performance |
| Timeline |
| UIL Co |
| Iljin Materials |
UIL and Iljin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UIL and Iljin Materials
The main advantage of trading using opposite UIL and Iljin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UIL position performs unexpectedly, Iljin Materials 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 Iljin Materials will offset losses from the drop in Iljin Materials' long position.| UIL vs. Dongsin Engineering Construction | UIL vs. Doosan Fuel Cell | UIL vs. Daishin Balance 1 | UIL vs. Total Soft Bank |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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