Correlation Between Union Petrochemical and Ubis Public

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

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

Diversification Opportunities for Union Petrochemical and Ubis Public

0.07

Correlation Coefficient

Union Petrochemical  Ubis Public

Significant diversification

The 3 months correlation between Union and Ubis is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Union Petrochemical Public and Ubis Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubis Public and Union Petrochemical 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 Petrochemical Public are associated (or correlated) with Ubis Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubis Public has no effect on the direction of Union Petrochemical i.e., Union Petrochemical and Ubis Public go up and down completely randomly.

Pair Corralation between Union Petrochemical and Ubis Public

Assuming the 90 days trading horizon Union Petrochemical Public is expected to generate 4.78 times more return on investment than Ubis Public. However, Union Petrochemical is 4.78 times more volatile than Ubis Public. It trades about 0.02 of its potential returns per unit of risk. Ubis Public is currently generating about -0.23 per unit of risk. If you would invest  59.00  in Union Petrochemical Public on December 23, 2024 and sell it today you would lose (5.00) from holding Union Petrochemical Public or give up 8.47% of portfolio value over 90 days.

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

Union Petrochemical Public  vs.  Ubis Public

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 1 (%) 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.

Ubis Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ubis Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Union Petrochemical and Ubis Public

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

The idea behind Union Petrochemical Public and Ubis 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.