Correlation Between Union Materials and Anam Electronics

Can any of the company-specific risk be diversified away by investing in both Union Materials and Anam Electronics 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 Anam Electronics 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 Anam Electronics Co, you can compare the effects of market volatilities on Union Materials and Anam Electronics 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 Anam Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Anam Electronics.

Diversification Opportunities for Union Materials and Anam Electronics

-0.05

Correlation Coefficient

Union Materials  Anam Electronics

Good diversification

The 3 months correlation between Union and Anam is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Anam Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anam Electronics 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 Anam Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anam Electronics has no effect on the direction of Union Materials i.e., Union Materials and Anam Electronics go up and down completely randomly.

Pair Corralation between Union Materials and Anam Electronics

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Anam Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Union Materials Corp is 1.16 times less risky than Anam Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The Anam Electronics Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  118,400  in Anam Electronics Co on September 26, 2024 and sell it today you would earn a total of  12,200  from holding Anam Electronics Co or generate 10.3% return on investment over 90 days.

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

Union Materials Corp  vs.  Anam Electronics Co

Union Materials Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Anam Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anam Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anam Electronics 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 Anam Electronics

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

The idea behind Union Materials Corp and Anam Electronics Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..