Correlation Between Punjab Chemicals and UTI Asset

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

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

Diversification Opportunities for Punjab Chemicals and UTI Asset

-0.31

Correlation Coefficient

Punjab Chemicals  UTI Asset

Very good diversification

The 3 months correlation between Punjab and UTI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Punjab Chemicals Crop 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 Punjab Chemicals 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 Punjab Chemicals Crop 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 Punjab Chemicals i.e., Punjab Chemicals and UTI Asset go up and down completely randomly.

Pair Corralation between Punjab Chemicals and UTI Asset

Assuming the 90 days trading horizon Punjab Chemicals Crop is expected to under-perform the UTI Asset. In addition to that, Punjab Chemicals is 1.05 times more volatile than UTI Asset Management. It trades about -0.04 of its total potential returns per unit of risk. UTI Asset Management is currently generating about 0.03 per unit of volatility. If you would invest  133,230  in UTI Asset Management on October 7, 2024 and sell it today you would earn a total of  2,990  from holding UTI Asset Management or generate 2.24% return on investment over 90 days.

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

Punjab Chemicals Crop  vs.  UTI Asset Management

Punjab Chemicals Crop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Punjab Chemicals Crop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UTI Asset Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, UTI Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Punjab Chemicals and UTI Asset

The main advantage of trading using opposite Punjab Chemicals and UTI Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Punjab Chemicals 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 Punjab Chemicals Crop 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.