Correlation Between PJ Metal and Union Materials
Can any of the company-specific risk be diversified away by investing in both PJ Metal 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 PJ Metal and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PJ Metal Co and Union Materials Corp, you can compare the effects of market volatilities on PJ Metal 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 PJ Metal with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Metal and Union Materials.
Diversification Opportunities for PJ Metal and Union Materials
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 128660 and Union is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co 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 PJ Metal 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 PJ Metal Co 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 PJ Metal i.e., PJ Metal and Union Materials go up and down completely randomly.
Pair Corralation between PJ Metal and Union Materials
Assuming the 90 days trading horizon PJ Metal Co is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, PJ Metal Co is 5.9 times less risky than Union Materials. The stock trades about -0.04 of its potential returns per unit of risk. The Union Materials Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 217,000 in Union Materials Corp on October 29, 2024 and sell it today you would earn a total of 10,500 from holding Union Materials Corp or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PJ Metal Co vs. Union Materials Corp
Performance |
| Timeline |
| PJ Metal |
| Union Materials Corp |
PJ Metal and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PJ Metal and Union Materials
The main advantage of trading using opposite PJ Metal and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PJ Metal 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.| PJ Metal vs. Global Standard Technology | PJ Metal vs. Daou Technology | PJ Metal vs. Samyang Foods Co | PJ Metal vs. Seers Technology |
| Union Materials vs. Jeju Beer Co | Union Materials vs. Netmarble Games Corp | Union Materials vs. Hanwha Chemical Corp | Union Materials vs. Daejung Chemicals Metals |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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