Correlation Between CU Tech and Iljin Materials

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

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

Diversification Opportunities for CU Tech and Iljin Materials

0.86

Correlation Coefficient

CU Tech  Iljin Materials

Very poor diversification

The 3 months correlation between 376290 and Iljin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CU Tech Corp and Iljin Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iljin Materials and CU Tech 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 CU Tech Corp are associated (or correlated) with Iljin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iljin Materials has no effect on the direction of CU Tech i.e., CU Tech and Iljin Materials go up and down completely randomly.

Pair Corralation between CU Tech and Iljin Materials

Assuming the 90 days trading horizon CU Tech Corp is expected to generate 0.42 times more return on investment than Iljin Materials. However, CU Tech Corp is 2.37 times less risky than Iljin Materials. It trades about -0.09 of its potential returns per unit of risk. Iljin Materials Co is currently generating about -0.23 per unit of risk. If you would invest  313,000  in CU Tech Corp on September 16, 2024 and sell it today you would lose (25,000) from holding CU Tech Corp or give up 7.99% of portfolio value over 90 days.

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

CU Tech Corp  vs.  Iljin Materials Co

CU Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CU Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Iljin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iljin Materials 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.

Pair Trading with CU Tech and Iljin Materials

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

The idea behind CU Tech Corp and Iljin Materials 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.