Correlation Between Fine Metal and Unimit Engineering

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

By analyzing existing cross correlation between Fine Metal Technologies and Unimit Engineering Public, you can compare the effects of market volatilities on Fine Metal and Unimit Engineering 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 Fine Metal with a short position of Unimit Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Metal and Unimit Engineering.

Diversification Opportunities for Fine Metal and Unimit Engineering

0.72

Correlation Coefficient

Fine Metal  Unimit Engineering

Poor diversification

The 3 months correlation between Fine and Unimit is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fine Metal Technologies and Unimit Engineering Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unimit Engineering Public and Fine 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 Fine Metal Technologies are associated (or correlated) with Unimit Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unimit Engineering Public has no effect on the direction of Fine Metal i.e., Fine Metal and Unimit Engineering go up and down completely randomly.

Pair Corralation between Fine Metal and Unimit Engineering

Assuming the 90 days trading horizon Fine Metal Technologies is expected to generate 1.09 times more return on investment than Unimit Engineering. However, Fine Metal is 1.09 times more volatile than Unimit Engineering Public. It trades about -0.01 of its potential returns per unit of risk. Unimit Engineering Public is currently generating about -0.09 per unit of risk. If you would invest  3,375  in Fine Metal Technologies on September 16, 2024 and sell it today you would lose (75.00) from holding Fine Metal Technologies or give up 2.22% of portfolio value over 90 days.

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

Fine Metal Technologies  vs.  Unimit Engineering Public

Fine Metal Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Unimit Engineering Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unimit Engineering Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Fine Metal and Unimit Engineering

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

The idea behind Fine Metal Technologies and Unimit Engineering 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.