Correlation Between EBEST Investment and Union Materials
Can any of the company-specific risk be diversified away by investing in both EBEST Investment and Union 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 EBEST Investment and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EBEST Investment Securities and Union Materials Corp, you can compare the effects of market volatilities on EBEST Investment and Union 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 EBEST Investment with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBEST Investment and Union Materials.
Diversification Opportunities for EBEST Investment and Union Materials
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between EBEST and Union is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding EBEST Investment Securities and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and EBEST Investment 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 EBEST Investment Securities are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of EBEST Investment i.e., EBEST Investment and Union Materials go up and down completely randomly.
Pair Corralation between EBEST Investment and Union Materials
Assuming the 90 days trading horizon EBEST Investment is expected to generate 10.97 times less return on investment than Union Materials. But when comparing it to its historical volatility, EBEST Investment Securities is 3.26 times less risky than Union Materials. It trades about 0.02 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 220,500 in Union Materials Corp on November 27, 2024 and sell it today you would earn a total of 9,500 from holding Union Materials Corp or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EBEST Investment Securities vs. Union Materials Corp
Performance |
| Timeline |
| EBEST Investment Sec |
| Union Materials Corp |
EBEST Investment and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EBEST Investment and Union Materials
The main advantage of trading using opposite EBEST Investment and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBEST Investment position performs unexpectedly, Union 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 Union Materials will offset losses from the drop in Union Materials' long position.| EBEST Investment vs. Namhae Chemical | EBEST Investment vs. Lotte Fine Chemical | EBEST Investment vs. Dongil Metal Co | EBEST Investment vs. Kumho Petro Chemical |
| Union Materials vs. InnoTherapy | Union Materials vs. NewFlex Technology Co | Union Materials vs. AeroSpace Technology of | Union Materials vs. Puloon Technology |
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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