Correlation Between Union Materials and Hanjin Transportation

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

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

Diversification Opportunities for Union Materials and Hanjin Transportation

0.16

Correlation Coefficient

Union Materials  Hanjin Transportation

Average diversification

The 3 months correlation between Union and Hanjin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Union Materials Corp and Hanjin Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjin Transportation and Union Materials 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 Materials Corp are associated (or correlated) with Hanjin Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjin Transportation has no effect on the direction of Union Materials i.e., Union Materials and Hanjin Transportation go up and down completely randomly.

Pair Corralation between Union Materials and Hanjin Transportation

Assuming the 90 days trading horizon Union Materials Corp is expected to generate 2.38 times more return on investment than Hanjin Transportation. However, Union Materials is 2.38 times more volatile than Hanjin Transportation Co. It trades about 0.02 of its potential returns per unit of risk. Hanjin Transportation Co is currently generating about 0.0 per unit of risk. If you would invest  219,500  in Union Materials Corp on September 26, 2024 and sell it today you would earn a total of  1,500  from holding Union Materials Corp or generate 0.68% return on investment over 90 days.

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

Union Materials Corp  vs.  Hanjin Transportation Co

Union Materials Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanjin Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjin Transportation Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanjin Transportation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Union Materials and Hanjin Transportation

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

The idea behind Union Materials Corp and Hanjin Transportation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.