Correlation Between Unitech Computer and First Insurance

Can any of the company-specific risk be diversified away by investing in both Unitech Computer and First Insurance 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 Unitech Computer and First Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unitech Computer Co and First Insurance Co, you can compare the effects of market volatilities on Unitech Computer and First Insurance 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 Unitech Computer with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unitech Computer and First Insurance.

Diversification Opportunities for Unitech Computer and First Insurance

0.87

Correlation Coefficient

Unitech Computer  First Insurance

Very poor diversification

The 3 months correlation between Unitech and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Unitech Computer Co and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and Unitech Computer 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 Unitech Computer Co are associated (or correlated) with First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of Unitech Computer i.e., Unitech Computer and First Insurance go up and down completely randomly.

Pair Corralation between Unitech Computer and First Insurance

Assuming the 90 days trading horizon Unitech Computer is expected to generate 1.74 times less return on investment than First Insurance. In addition to that, Unitech Computer is 1.38 times more volatile than First Insurance Co. It trades about 0.1 of its total potential returns per unit of risk. First Insurance Co is currently generating about 0.25 per unit of volatility. If you would invest  2,255  in First Insurance Co on September 14, 2024 and sell it today you would earn a total of  295.00  from holding First Insurance Co or generate 13.08% return on investment over 90 days.

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

Unitech Computer Co  vs.  First Insurance Co

Unitech Computer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unitech Computer Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Unitech Computer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Insurance Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unitech Computer and First Insurance

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

The idea behind Unitech Computer Co and First Insurance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..