Correlation Between EV Advanced and Union Materials

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

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

Diversification Opportunities for EV Advanced and Union Materials

0.48

Correlation Coefficient

EV Advanced  Union Materials

Very weak diversification

The 3 months correlation between 131400 and Union is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material 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 EV Advanced 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 EV Advanced Material 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 EV Advanced i.e., EV Advanced and Union Materials go up and down completely randomly.

Pair Corralation between EV Advanced and Union Materials

Assuming the 90 days trading horizon EV Advanced Material is expected to under-perform the Union Materials. In addition to that, EV Advanced is 1.02 times more volatile than Union Materials Corp. It trades about -0.1 of its total potential returns per unit of risk. Union Materials Corp is currently generating about 0.08 per unit of volatility. If you would invest  227,000  in Union Materials Corp on October 21, 2024 and sell it today you would earn a total of  19,000  from holding Union Materials Corp or generate 8.37% return on investment over 90 days.

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

EV Advanced Material  vs.  Union Materials Corp

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Union Materials Corp

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with EV Advanced and Union Materials

The main advantage of trading using opposite EV Advanced and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EV Advanced 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 EV Advanced Material 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.