Correlation Between UCO Bank and SAL Steel

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

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

Diversification Opportunities for UCO Bank and SAL Steel

0.48

Correlation Coefficient

UCO Bank  SAL Steel

Very weak diversification

The 3 months correlation between UCO and SAL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding UCO Bank and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and UCO Bank 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 UCO Bank are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of UCO Bank i.e., UCO Bank and SAL Steel go up and down completely randomly.

Pair Corralation between UCO Bank and SAL Steel

Assuming the 90 days trading horizon UCO Bank is expected to under-perform the SAL Steel. In addition to that, UCO Bank is 1.06 times more volatile than SAL Steel Limited. It trades about -0.33 of its total potential returns per unit of risk. SAL Steel Limited is currently generating about -0.3 per unit of volatility. If you would invest  2,515  in SAL Steel Limited on October 7, 2024 and sell it today you would lose (220.00) from holding SAL Steel Limited or give up 8.75% of portfolio value over 90 days.

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

UCO Bank  vs.  SAL Steel Limited

UCO Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UCO Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, UCO Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with UCO Bank and SAL Steel

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

The idea behind UCO Bank and SAL Steel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.