Correlation Between Union Materials and KT

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

Diversification Opportunities for Union Materials and KT

-0.72

Correlation Coefficient

Union Materials  KT

Pay attention - limited upside

The 3 months correlation between Union and KT is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation 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 KT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Corporation has no effect on the direction of Union Materials i.e., Union Materials and KT go up and down completely randomly.

Pair Corralation between Union Materials and KT

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the KT. In addition to that, Union Materials is 2.0 times more volatile than KT Corporation. It trades about -0.04 of its total potential returns per unit of risk. KT Corporation is currently generating about 0.18 per unit of volatility. If you would invest  4,339,370  in KT Corporation on December 30, 2024 and sell it today you would earn a total of  645,630  from holding KT Corporation or generate 14.88% return on investment over 90 days.

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

Union Materials Corp  vs.  KT Corp.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KT Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Materials and KT

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

The idea behind Union Materials Corp and KT Corporation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.