Correlation Between Union Materials and AptaBio Therapeutics

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

Diversification Opportunities for Union Materials and AptaBio Therapeutics

0.6

Correlation Coefficient

Union Materials  AptaBio Therapeutics

Poor diversification

The 3 months correlation between Union and AptaBio is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and AptaBio Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AptaBio Therapeutics 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 AptaBio Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AptaBio Therapeutics has no effect on the direction of Union Materials i.e., Union Materials and AptaBio Therapeutics go up and down completely randomly.

Pair Corralation between Union Materials and AptaBio Therapeutics

Assuming the 90 days trading horizon Union Materials Corp is expected to generate 0.99 times more return on investment than AptaBio Therapeutics. However, Union Materials Corp is 1.01 times less risky than AptaBio Therapeutics. It trades about -0.01 of its potential returns per unit of risk. AptaBio Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  242,000  in Union Materials Corp on October 24, 2024 and sell it today you would lose (11,000) from holding Union Materials Corp or give up 4.55% of portfolio value over 90 days.

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

Union Materials Corp  vs.  AptaBio Therapeutics

Union Materials Corp

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AptaBio Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AptaBio Therapeutics 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.

Pair Trading with Union Materials and AptaBio Therapeutics

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

The idea behind Union Materials Corp and AptaBio Therapeutics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.