Correlation Between Union Bank and STARLUX Airlines

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

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

Diversification Opportunities for Union Bank and STARLUX Airlines

-0.25

Correlation Coefficient

Union Bank  STARLUX Airlines

Very good diversification

The 3 months correlation between Union and STARLUX is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and STARLUX Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STARLUX Airlines and Union Bank 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 Bank of are associated (or correlated) with STARLUX Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STARLUX Airlines has no effect on the direction of Union Bank i.e., Union Bank and STARLUX Airlines go up and down completely randomly.

Pair Corralation between Union Bank and STARLUX Airlines

Assuming the 90 days trading horizon Union Bank of is expected to generate 0.53 times more return on investment than STARLUX Airlines. However, Union Bank of is 1.88 times less risky than STARLUX Airlines. It trades about 0.0 of its potential returns per unit of risk. STARLUX Airlines Co is currently generating about -0.15 per unit of risk. If you would invest  1,535  in Union Bank of on October 23, 2024 and sell it today you would lose (5.00) from holding Union Bank of or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.6%
Values	Daily Returns

Union Bank of  vs.  STARLUX Airlines Co

Union Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Union Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

STARLUX Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STARLUX Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Union Bank and STARLUX Airlines

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

The idea behind Union Bank of and STARLUX Airlines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.