Correlation Between LockLock and Union Materials

Can any of the company-specific risk be diversified away by investing in both LockLock and Union Materials 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 LockLock and Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LockLock Co and Union Materials Corp, you can compare the effects of market volatilities on LockLock and Union Materials 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 LockLock with a short position of Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of LockLock and Union Materials.

Diversification Opportunities for LockLock and Union Materials

-0.54

Correlation Coefficient

LockLock  Union Materials

Excellent diversification

The 3 months correlation between LockLock and Union is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LockLock Co and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and LockLock 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 LockLock Co are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of LockLock i.e., LockLock and Union Materials go up and down completely randomly.

Pair Corralation between LockLock and Union Materials

Assuming the 90 days trading horizon LockLock is expected to generate 1926.0 times less return on investment than Union Materials. But when comparing it to its historical volatility, LockLock Co is 20.03 times less risky than Union Materials. It trades about 0.0 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  212,000  in Union Materials Corp on September 13, 2024 and sell it today you would earn a total of  17,500  from holding Union Materials Corp or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

LockLock Co  vs.  Union Materials Corp

LockLock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LockLock Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LockLock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Union Materials Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 4 (%) 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.

Pair Trading with LockLock and Union Materials

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

The idea behind LockLock Co and Union Materials 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.