Correlation Between Union Materials and Youngsin Metal

Can any of the company-specific risk be diversified away by investing in both Union Materials and Youngsin Metal 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 Union Materials and Youngsin Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Union Materials Corp and Youngsin Metal Industrial, you can compare the effects of market volatilities on Union Materials and Youngsin Metal 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 Union Materials with a short position of Youngsin Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Youngsin Metal.

Diversification Opportunities for Union Materials and Youngsin Metal

-0.22

Correlation Coefficient

Union Materials  Youngsin Metal

Very good diversification

The 3 months correlation between Union and Youngsin is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Youngsin Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngsin Metal Industrial and Union Materials 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 Union Materials Corp are associated (or correlated) with Youngsin Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngsin Metal Industrial has no effect on the direction of Union Materials i.e., Union Materials and Youngsin Metal go up and down completely randomly.

Pair Corralation between Union Materials and Youngsin Metal

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Youngsin Metal. In addition to that, Union Materials is 1.04 times more volatile than Youngsin Metal Industrial. It trades about -0.02 of its total potential returns per unit of risk. Youngsin Metal Industrial is currently generating about 0.01 per unit of volatility. If you would invest  208,500  in Youngsin Metal Industrial on December 4, 2024 and sell it today you would lose (3,000) from holding Youngsin Metal Industrial or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Union Materials Corp  vs.  Youngsin Metal Industrial

Union Materials Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Union Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Youngsin Metal Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Youngsin Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Youngsin Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Union Materials and Youngsin Metal

The main advantage of trading using opposite Union Materials and Youngsin Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Materials position performs unexpectedly, Youngsin Metal 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 Youngsin Metal will offset losses from the drop in Youngsin Metal's long position.

The idea behind Union Materials Corp and Youngsin Metal Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.