Correlation Between Central Bank and UCO Bank

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

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

Diversification Opportunities for Central Bank and UCO Bank

0.91

Correlation Coefficient

Central Bank  UCO Bank

Almost no diversification

The 3 months correlation between Central and UCO is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Central Bank of and UCO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCO Bank and Central Bank 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 Central Bank of are associated (or correlated) with UCO Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UCO Bank has no effect on the direction of Central Bank i.e., Central Bank and UCO Bank go up and down completely randomly.

Pair Corralation between Central Bank and UCO Bank

Assuming the 90 days trading horizon Central Bank is expected to generate 1.45 times less return on investment than UCO Bank. But when comparing it to its historical volatility, Central Bank of is 1.12 times less risky than UCO Bank. It trades about 0.08 of its potential returns per unit of risk. UCO Bank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,248  in UCO Bank on September 20, 2024 and sell it today you would earn a total of  288.00  from holding UCO Bank or generate 6.78% return on investment over 90 days.

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

Central Bank of  vs.  UCO Bank

Central Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

UCO Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Central Bank and UCO Bank

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

The idea behind Central Bank of and UCO Bank 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.