Correlation Between Jubilant Foodworks and UTI Asset

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

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

Diversification Opportunities for Jubilant Foodworks and UTI Asset

0.2

Correlation Coefficient

Jubilant Foodworks  UTI Asset

Modest diversification

The 3 months correlation between Jubilant and UTI is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Jubilant Foodworks 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 Jubilant Foodworks 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 Jubilant Foodworks 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 Jubilant Foodworks i.e., Jubilant Foodworks and UTI Asset go up and down completely randomly.

Pair Corralation between Jubilant Foodworks and UTI Asset

Assuming the 90 days trading horizon Jubilant Foodworks Limited is expected to generate 0.99 times more return on investment than UTI Asset. However, Jubilant Foodworks Limited is 1.01 times less risky than UTI Asset. It trades about 0.17 of its potential returns per unit of risk. UTI Asset Management is currently generating about -0.1 per unit of risk. If you would invest  63,275  in Jubilant Foodworks Limited on September 24, 2024 and sell it today you would earn a total of  3,995  from holding Jubilant Foodworks Limited or generate 6.31% return on investment over 90 days.

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

Jubilant Foodworks Limited  vs.  UTI Asset Management

Jubilant Foodworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

UTI Asset Management

Risk-Adjusted Performance

0 of 100

Very 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 Jubilant Foodworks and UTI Asset

The main advantage of trading using opposite Jubilant Foodworks and UTI Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jubilant Foodworks 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 Jubilant Foodworks 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.