Correlation Between Speciality Restaurants and UltraTech Cement

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

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

Diversification Opportunities for Speciality Restaurants and UltraTech Cement

-0.03

Correlation Coefficient

Speciality Restaurants  UltraTech Cement

Good diversification

The 3 months correlation between Speciality and UltraTech is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and UltraTech Cement Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UltraTech Cement and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with UltraTech Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UltraTech Cement has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and UltraTech Cement go up and down completely randomly.

Pair Corralation between Speciality Restaurants and UltraTech Cement

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the UltraTech Cement. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.39 times less risky than UltraTech Cement. The stock trades about -0.17 of its potential returns per unit of risk. The UltraTech Cement Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,095,265  in UltraTech Cement Limited on October 22, 2024 and sell it today you would lose (37,265) from holding UltraTech Cement Limited or give up 3.4% of portfolio value over 90 days.

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

Speciality Restaurants Limited  vs.  UltraTech Cement Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, UltraTech Cement is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Speciality Restaurants and UltraTech Cement

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

The idea behind Speciality Restaurants Limited and UltraTech Cement 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.