Correlation Between Alton Sports and Union Materials
Can any of the company-specific risk be diversified away by investing in both Alton Sports 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 Alton Sports and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alton Sports CoLtd and Union Materials Corp, you can compare the effects of market volatilities on Alton Sports 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 Alton Sports with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and Union Materials.
Diversification Opportunities for Alton Sports and Union Materials
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alton and Union is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd 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 Alton Sports 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 Alton Sports CoLtd 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 Alton Sports i.e., Alton Sports and Union Materials go up and down completely randomly.
Pair Corralation between Alton Sports and Union Materials
Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 1.71 times less risky than Union Materials. The stock trades about -0.08 of its potential returns per unit of risk. The Union Materials Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 277,000 in Union Materials Corp on November 1, 2024 and sell it today you would lose (49,500) from holding Union Materials Corp or give up 17.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alton Sports CoLtd vs. Union Materials Corp
Performance |
| Timeline |
| Alton Sports CoLtd |
| Union Materials Corp |
Alton Sports and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alton Sports and Union Materials
The main advantage of trading using opposite Alton Sports and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alton Sports 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.| Alton Sports vs. Neungyule Education | Alton Sports vs. Songwon Industrial Co | Alton Sports vs. Korea Industrial Co | Alton Sports vs. YeaRimDang Publishing Co |
| Union Materials vs. Pyung Hwa Industrial | Union Materials vs. Dongil Metal Co | Union Materials vs. LEENO Industrial | Union Materials vs. Samlip General Foods |
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 Stocks Directory module to find actively traded stocks across global markets.
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