Correlation Between Chambal Fertilizers and UPL

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

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

Diversification Opportunities for Chambal Fertilizers and UPL

0.31

Correlation Coefficient

Chambal Fertilizers  UPL

Weak diversification

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

Pair Corralation between Chambal Fertilizers and UPL

Assuming the 90 days trading horizon Chambal Fertilizers Chemicals is expected to generate 1.3 times more return on investment than UPL. However, Chambal Fertilizers is 1.3 times more volatile than UPL Limited. It trades about 0.04 of its potential returns per unit of risk. UPL Limited is currently generating about -0.13 per unit of risk. If you would invest  48,546  in Chambal Fertilizers Chemicals on September 23, 2024 and sell it today you would earn a total of  2,369  from holding Chambal Fertilizers Chemicals or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Chambal Fertilizers Chemicals  vs.  UPL Limited

Chambal Fertilizers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Chambal Fertilizers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UPL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Chambal Fertilizers and UPL

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

The idea behind Chambal Fertilizers Chemicals and UPL Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.