Correlation Between UFLEX and Indo Amines

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

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

Diversification Opportunities for UFLEX and Indo Amines

0.69

Correlation Coefficient

UFLEX  Indo Amines

Poor diversification

The 3 months correlation between UFLEX and Indo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding UFLEX Limited and Indo Amines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Amines Limited and UFLEX 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 UFLEX Limited are associated (or correlated) with Indo Amines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Amines Limited has no effect on the direction of UFLEX i.e., UFLEX and Indo Amines go up and down completely randomly.

Pair Corralation between UFLEX and Indo Amines

Assuming the 90 days trading horizon UFLEX Limited is expected to under-perform the Indo Amines. But the stock apears to be less risky and, when comparing its historical volatility, UFLEX Limited is 1.57 times less risky than Indo Amines. The stock trades about -0.22 of its potential returns per unit of risk. The Indo Amines Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  18,344  in Indo Amines Limited on August 31, 2024 and sell it today you would lose (881.00) from holding Indo Amines Limited or give up 4.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

UFLEX Limited  vs.  Indo Amines Limited

UFLEX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UFLEX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Indo Amines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Amines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Indo Amines is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with UFLEX and Indo Amines

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

The idea behind UFLEX Limited and Indo Amines 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.