Correlation Between Kukil Metal and Union Materials

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

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

Diversification Opportunities for Kukil Metal and Union Materials

-0.31

Correlation Coefficient

Kukil Metal  Union Materials

Very good diversification

The 3 months correlation between Kukil and Union is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kukil Metal Co and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and Kukil Metal 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 Kukil Metal Co are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Kukil Metal i.e., Kukil Metal and Union Materials go up and down completely randomly.

Pair Corralation between Kukil Metal and Union Materials

Assuming the 90 days trading horizon Kukil Metal Co is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, Kukil Metal Co is 1.96 times less risky than Union Materials. The stock trades about -0.13 of its potential returns per unit of risk. The Union Materials Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  211,000  in Union Materials Corp on September 14, 2024 and sell it today you would earn a total of  15,500  from holding Union Materials Corp or generate 7.35% return on investment over 90 days.

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

Kukil Metal Co  vs.  Union Materials Corp

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukil Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Union Materials Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 4 (%) 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.

Pair Trading with Kukil Metal and Union Materials

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

The idea behind Kukil Metal Co and Union Materials Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.