Correlation Between IG Petrochemicals and UPL

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

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

Diversification Opportunities for IG Petrochemicals and UPL

0.31

Correlation Coefficient

IG Petrochemicals  UPL

Weak diversification

The 3 months correlation between IGPL and UPL is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding IG Petrochemicals Limited and UPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPL Limited and IG Petrochemicals 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 IG Petrochemicals Limited 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 IG Petrochemicals i.e., IG Petrochemicals and UPL go up and down completely randomly.

Pair Corralation between IG Petrochemicals and UPL

Assuming the 90 days trading horizon IG Petrochemicals Limited is expected to under-perform the UPL. In addition to that, IG Petrochemicals is 1.47 times more volatile than UPL Limited. It trades about -0.05 of its total potential returns per unit of risk. UPL Limited is currently generating about 0.04 per unit of volatility. If you would invest  53,175  in UPL Limited on October 23, 2024 and sell it today you would earn a total of  2,110  from holding UPL Limited or generate 3.97% return on investment over 90 days.

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

IG Petrochemicals Limited  vs.  UPL Limited

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

UPL Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UPL Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, UPL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IG Petrochemicals and UPL

The main advantage of trading using opposite IG Petrochemicals and UPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IG Petrochemicals 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 IG Petrochemicals Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.