Correlation Between GM Breweries and UTI Asset

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

By analyzing existing cross correlation between GM Breweries Limited and UTI Asset Management, you can compare the effects of market volatilities on GM Breweries and UTI Asset 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 GM Breweries with a short position of UTI Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and UTI Asset.

Diversification Opportunities for GM Breweries and UTI Asset

0.7

Correlation Coefficient

GM Breweries  UTI Asset

Poor diversification

The 3 months correlation between GMBREW and UTI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and UTI Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Asset Management and GM Breweries 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 GM Breweries Limited are associated (or correlated) with UTI Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Asset Management has no effect on the direction of GM Breweries i.e., GM Breweries and UTI Asset go up and down completely randomly.

Pair Corralation between GM Breweries and UTI Asset

Assuming the 90 days trading horizon GM Breweries Limited is expected to under-perform the UTI Asset. But the stock apears to be less risky and, when comparing its historical volatility, GM Breweries Limited is 1.34 times less risky than UTI Asset. The stock trades about -0.06 of its potential returns per unit of risk. The UTI Asset Management is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  120,095  in UTI Asset Management on October 27, 2024 and sell it today you would lose (2,835) from holding UTI Asset Management or give up 2.36% of portfolio value over 90 days.

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

GM Breweries Limited  vs.  UTI Asset Management

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

UTI Asset Management

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days UTI Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UTI Asset is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM Breweries and UTI Asset

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

The idea behind GM Breweries Limited and UTI Asset Management 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.