Correlation Between Univanich Palm and Union Petrochemical

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

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

Diversification Opportunities for Univanich Palm and Union Petrochemical

-0.78

Correlation Coefficient

Univanich Palm  Union Petrochemical

Pay attention - limited upside

The 3 months correlation between Univanich and Union is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Univanich Palm Oil and Union Petrochemical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Petrochemical and Univanich Palm 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 Univanich Palm Oil 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 Univanich Palm i.e., Univanich Palm and Union Petrochemical go up and down completely randomly.

Pair Corralation between Univanich Palm and Union Petrochemical

Assuming the 90 days trading horizon Univanich Palm Oil is expected to generate 0.37 times more return on investment than Union Petrochemical. However, Univanich Palm Oil is 2.72 times less risky than Union Petrochemical. It trades about 0.04 of its potential returns per unit of risk. Union Petrochemical Public is currently generating about -0.38 per unit of risk. If you would invest  915.00  in Univanich Palm Oil on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Univanich Palm Oil or generate 0.55% return on investment over 90 days.

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

Univanich Palm Oil  vs.  Union Petrochemical Public

Univanich Palm Oil

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Univanich Palm Oil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Univanich Palm is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Union Petrochemical

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Univanich Palm and Union Petrochemical

The main advantage of trading using opposite Univanich Palm and Union Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Univanich Palm 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 Univanich Palm Oil 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.