Correlation Between Union Materials and Ecoplastic

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

Diversification Opportunities for Union Materials and Ecoplastic

-0.02

Correlation Coefficient

Union Materials  Ecoplastic

Good diversification

The 3 months correlation between Union and Ecoplastic is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic 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 Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of Union Materials i.e., Union Materials and Ecoplastic go up and down completely randomly.

Pair Corralation between Union Materials and Ecoplastic

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Ecoplastic. In addition to that, Union Materials is 1.32 times more volatile than Ecoplastic. It trades about -0.07 of its total potential returns per unit of risk. Ecoplastic is currently generating about 0.14 per unit of volatility. If you would invest  229,000  in Ecoplastic on December 26, 2024 and sell it today you would earn a total of  38,000  from holding Ecoplastic or generate 16.59% 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.  Ecoplastic

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.

Ecoplastic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecoplastic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecoplastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Materials and Ecoplastic

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

The idea behind Union Materials Corp and Ecoplastic 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.