Correlation Between Union Materials and Hanwha InvestmentSecuri

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

Diversification Opportunities for Union Materials and Hanwha InvestmentSecuri

0.16

Correlation Coefficient

Union Materials  Hanwha InvestmentSecuri

Average diversification

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

Pair Corralation between Union Materials and Hanwha InvestmentSecuri

Assuming the 90 days trading horizon Union Materials Corp is expected to generate 0.7 times more return on investment than Hanwha InvestmentSecuri. However, Union Materials Corp is 1.43 times less risky than Hanwha InvestmentSecuri. It trades about -0.06 of its potential returns per unit of risk. Hanwha InvestmentSecurities Co is currently generating about -0.09 per unit of risk. If you would invest  232,500  in Union Materials Corp on September 23, 2024 and sell it today you would lose (13,500) from holding Union Materials Corp or give up 5.81% of portfolio value over 90 days.

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

Union Materials Corp  vs.  Hanwha InvestmentSecurities Co

Union Materials Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanwha InvestmentSecuri

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha InvestmentSecurities Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha InvestmentSecuri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Union Materials and Hanwha InvestmentSecuri

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

The idea behind Union Materials Corp and Hanwha InvestmentSecurities 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.