Correlation Between Telsys and Utron

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

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

Diversification Opportunities for Telsys and Utron

0.3

Correlation Coefficient

Telsys  Utron

Weak diversification

The 3 months correlation between Telsys and Utron is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Telsys and Utron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utron and Telsys 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 Telsys are associated (or correlated) with Utron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utron has no effect on the direction of Telsys i.e., Telsys and Utron go up and down completely randomly.

Pair Corralation between Telsys and Utron

Assuming the 90 days trading horizon Telsys is expected to under-perform the Utron. In addition to that, Telsys is 2.87 times more volatile than Utron. It trades about -0.12 of its total potential returns per unit of risk. Utron is currently generating about -0.02 per unit of volatility. If you would invest  38,700  in Utron on August 31, 2024 and sell it today you would lose (400.00) from holding Utron or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Telsys  vs.  Utron

Telsys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telsys has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telsys is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Utron

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utron are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Utron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telsys and Utron

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

The idea behind Telsys and Utron 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.