Correlation Between Solution Advanced and Union Materials
Can any of the company-specific risk be diversified away by investing in both Solution Advanced 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 Solution Advanced and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solution Advanced Technology and Union Materials Corp, you can compare the effects of market volatilities on Solution Advanced 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 Solution Advanced with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Advanced and Union Materials.
Diversification Opportunities for Solution Advanced and Union Materials
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Solution and Union is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology 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 Solution Advanced 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 Solution Advanced Technology 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 Solution Advanced i.e., Solution Advanced and Union Materials go up and down completely randomly.
Pair Corralation between Solution Advanced and Union Materials
Assuming the 90 days trading horizon Solution Advanced Technology is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, Solution Advanced Technology is 1.15 times less risky than Union Materials. The stock trades about -0.13 of its potential returns per unit of risk. The Union Materials Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 210,500 in Union Materials Corp on September 12, 2024 and sell it today you would earn a total of 19,000 from holding Union Materials Corp or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solution Advanced Technology vs. Union Materials Corp
Performance |
| Timeline |
| Solution Advanced |
| Union Materials Corp |
Solution Advanced and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solution Advanced and Union Materials
The main advantage of trading using opposite Solution Advanced and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solution Advanced 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.| Solution Advanced vs. Samsung Electronics Co | Solution Advanced vs. Samsung Electronics Co | Solution Advanced vs. LG Energy Solution | Solution Advanced vs. SK Hynix |
| Union Materials vs. Daou Data Corp | Union Materials vs. Solution Advanced Technology | Union Materials vs. Busan Industrial Co | Union Materials vs. Busan Ind |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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