Correlation Between Union Materials and Samsung Leverage

Can any of the company-specific risk be diversified away by investing in both Union Materials and Samsung Leverage 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 Samsung Leverage 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 Samsung Leverage ChinaA50, you can compare the effects of market volatilities on Union Materials and Samsung Leverage 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 Samsung Leverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Materials and Samsung Leverage.

Diversification Opportunities for Union Materials and Samsung Leverage

-0.72

Correlation Coefficient

Union Materials  Samsung Leverage

Pay attention - limited upside

The 3 months correlation between Union and Samsung is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Samsung Leverage ChinaA50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Leverage ChinaA50 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 Samsung Leverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Leverage ChinaA50 has no effect on the direction of Union Materials i.e., Union Materials and Samsung Leverage go up and down completely randomly.

Pair Corralation between Union Materials and Samsung Leverage

Assuming the 90 days trading horizon Union Materials Corp is expected to under-perform the Samsung Leverage. In addition to that, Union Materials is 1.16 times more volatile than Samsung Leverage ChinaA50. It trades about -0.06 of its total potential returns per unit of risk. Samsung Leverage ChinaA50 is currently generating about -0.02 per unit of volatility. If you would invest  3,661,000  in Samsung Leverage ChinaA50 on December 24, 2024 and sell it today you would lose (128,500) from holding Samsung Leverage ChinaA50 or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Union Materials Corp  vs.  Samsung Leverage ChinaA50

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.

Samsung Leverage ChinaA50

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Leverage ChinaA50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung Leverage 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 Samsung Leverage

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

The idea behind Union Materials Corp and Samsung Leverage ChinaA50 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.