Correlation Between Union Materials and SK Chemicals

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

Diversification Opportunities for Union Materials and SK Chemicals

-0.1

Correlation Coefficient

Union Materials  SK Chemicals

Good diversification

The 3 months correlation between Union and 285130 is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals 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 SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of Union Materials i.e., Union Materials and SK Chemicals go up and down completely randomly.

Pair Corralation between Union Materials and SK Chemicals

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the SK Chemicals. In addition to that, Union Materials is 1.17 times more volatile than SK Chemicals Co. It trades about -0.03 of its total potential returns per unit of risk. SK Chemicals Co is currently generating about 0.15 per unit of volatility. If you would invest  4,285,000  in SK Chemicals Co on September 22, 2024 and sell it today you would earn a total of  415,000  from holding SK Chemicals Co or generate 9.68% 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.  SK Chemicals Co

Union Materials Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SK Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SK Chemicals 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 SK Chemicals

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

The idea behind Union Materials Corp and SK Chemicals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.