Correlation Between Food Moments and Union Petrochemical

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

By analyzing existing cross correlation between Food Moments PCL and Union Petrochemical Public, you can compare the effects of market volatilities on Food Moments and Union Petrochemical 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 Food Moments with a short position of Union Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Moments and Union Petrochemical.

Diversification Opportunities for Food Moments and Union Petrochemical

0.09

Correlation Coefficient

Food Moments  Union Petrochemical

Significant diversification

The 3 months correlation between Food and Union is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Food Moments PCL and Union Petrochemical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Petrochemical and Food Moments 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 Food Moments PCL are associated (or correlated) with Union Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Petrochemical has no effect on the direction of Food Moments i.e., Food Moments and Union Petrochemical go up and down completely randomly.

Pair Corralation between Food Moments and Union Petrochemical

Assuming the 90 days horizon Food Moments is expected to generate 2.35 times less return on investment than Union Petrochemical. But when comparing it to its historical volatility, Food Moments PCL is 3.49 times less risky than Union Petrochemical. It trades about 0.06 of its potential returns per unit of risk. Union Petrochemical Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Union Petrochemical Public on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Union Petrochemical Public or generate 0.0% return on investment over 90 days.

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

Food Moments PCL  vs.  Union Petrochemical Public

Food Moments PCL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Food Moments PCL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Food Moments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Union Petrochemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Petrochemical Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Union Petrochemical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Food Moments and Union Petrochemical

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

The idea behind Food Moments PCL and Union Petrochemical Public 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.