Correlation Between Union Materials and Parksystems Corp

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

Diversification Opportunities for Union Materials and Parksystems Corp

0.62

Correlation Coefficient

Union Materials  Parksystems Corp

Poor diversification

The 3 months correlation between Union and Parksystems is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Parksystems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parksystems 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 Parksystems Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parksystems Corp has no effect on the direction of Union Materials i.e., Union Materials and Parksystems Corp go up and down completely randomly.

Pair Corralation between Union Materials and Parksystems Corp

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Parksystems Corp. In addition to that, Union Materials is 1.07 times more volatile than Parksystems Corp. It trades about -0.07 of its total potential returns per unit of risk. Parksystems Corp is currently generating about 0.03 per unit of volatility. If you would invest  19,900,000  in Parksystems Corp on December 26, 2024 and sell it today you would earn a total of  550,000  from holding Parksystems Corp or generate 2.76% return on investment over 90 days.

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

Union Materials Corp  vs.  Parksystems 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.

Parksystems Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parksystems Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Parksystems Corp 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 Parksystems Corp

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

The idea behind Union Materials Corp and Parksystems 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.