Correlation Between City Union and MphasiS

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

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

Diversification Opportunities for City Union and MphasiS

0.1

Correlation Coefficient

City Union  MphasiS

Average diversification

The 3 months correlation between City and MphasiS is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and MphasiS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MphasiS Limited and City Union 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 City Union Bank are associated (or correlated) with MphasiS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MphasiS Limited has no effect on the direction of City Union i.e., City Union and MphasiS go up and down completely randomly.

Pair Corralation between City Union and MphasiS

Assuming the 90 days trading horizon City Union Bank is expected to generate 1.01 times more return on investment than MphasiS. However, City Union is 1.01 times more volatile than MphasiS Limited. It trades about 0.1 of its potential returns per unit of risk. MphasiS Limited is currently generating about 0.03 per unit of risk. If you would invest  16,566  in City Union Bank on September 12, 2024 and sell it today you would earn a total of  2,049  from holding City Union Bank or generate 12.37% return on investment over 90 days.

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

City Union Bank  vs.  MphasiS Limited

City Union Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, City Union exhibited solid returns over the last few months and may actually be approaching a breakup point.

MphasiS Limited

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MphasiS Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MphasiS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with City Union and MphasiS

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

The idea behind City Union Bank and MphasiS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.