Correlation Between Union Materials and Narae Nanotech

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

Diversification Opportunities for Union Materials and Narae Nanotech

-0.05

Correlation Coefficient

Union Materials  Narae Nanotech

Good diversification

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

Pair Corralation between Union Materials and Narae Nanotech

Assuming the 90 days trading horizon Union Materials Corp is expected to generate 0.92 times more return on investment than Narae Nanotech. However, Union Materials Corp is 1.08 times less risky than Narae Nanotech. It trades about -0.06 of its potential returns per unit of risk. Narae Nanotech Corp is currently generating about -0.25 per unit of risk. If you would invest  221,000  in Union Materials Corp on December 24, 2024 and sell it today you would lose (22,600) from holding Union Materials Corp or give up 10.23% 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.  Narae Nanotech 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.

Narae Nanotech Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Narae Nanotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Union Materials and Narae Nanotech

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

The idea behind Union Materials Corp and Narae Nanotech Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.