Correlation Between Hi Tech and Unitech

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

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

Diversification Opportunities for Hi Tech and Unitech

0.74

Correlation Coefficient

Hi Tech  Unitech

Poor diversification

The 3 months correlation between HITECH and Unitech is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Pipes Limited and Unitech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unitech Limited and Hi Tech 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 Hi Tech Pipes Limited are associated (or correlated) with Unitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unitech Limited has no effect on the direction of Hi Tech i.e., Hi Tech and Unitech go up and down completely randomly.

Pair Corralation between Hi Tech and Unitech

Assuming the 90 days trading horizon Hi Tech is expected to generate 2.38 times less return on investment than Unitech. But when comparing it to its historical volatility, Hi Tech Pipes Limited is 1.17 times less risky than Unitech. It trades about 0.06 of its potential returns per unit of risk. Unitech Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Unitech Limited on October 4, 2024 and sell it today you would earn a total of  746.00  from holding Unitech Limited or generate 426.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Hi Tech Pipes Limited  vs.  Unitech Limited

Hi Tech Pipes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Tech Pipes Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Unitech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unitech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hi Tech and Unitech

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

The idea behind Hi Tech Pipes Limited and Unitech 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.