Correlation Between Union Petrochemical and Eureka Design

Can any of the company-specific risk be diversified away by investing in both Union Petrochemical and Eureka Design 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 Eureka Design 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 Eureka Design Public, you can compare the effects of market volatilities on Union Petrochemical and Eureka Design 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 Eureka Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Petrochemical and Eureka Design.

Diversification Opportunities for Union Petrochemical and Eureka Design

0.03

Correlation Coefficient

Union Petrochemical  Eureka Design

Significant diversification

The 3 months correlation between Union and Eureka is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Union Petrochemical Public and Eureka Design Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eureka Design 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 Eureka Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eureka Design Public has no effect on the direction of Union Petrochemical i.e., Union Petrochemical and Eureka Design go up and down completely randomly.

Pair Corralation between Union Petrochemical and Eureka Design

Assuming the 90 days trading horizon Union Petrochemical Public is expected to generate 3.37 times more return on investment than Eureka Design. However, Union Petrochemical is 3.37 times more volatile than Eureka Design Public. It trades about 0.0 of its potential returns per unit of risk. Eureka Design Public is currently generating about -0.06 per unit of risk. If you would invest  59.00  in Union Petrochemical Public on December 30, 2024 and sell it today you would lose (12.00) from holding Union Petrochemical Public or give up 20.34% 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.  Eureka Design Public

Union Petrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Union Petrochemical Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Union Petrochemical is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Eureka Design Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eureka Design Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Union Petrochemical and Eureka Design

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

The idea behind Union Petrochemical Public and Eureka Design 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.