Correlation Between UltraTech Cement and CCL Products

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

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

Diversification Opportunities for UltraTech Cement and CCL Products

0.5

Correlation Coefficient

UltraTech Cement  CCL Products

Very weak diversification

The 3 months correlation between UltraTech and CCL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and CCL Products Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Products Limited and UltraTech Cement 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 UltraTech Cement Limited are associated (or correlated) with CCL Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Products Limited has no effect on the direction of UltraTech Cement i.e., UltraTech Cement and CCL Products go up and down completely randomly.

Pair Corralation between UltraTech Cement and CCL Products

Assuming the 90 days trading horizon UltraTech Cement Limited is expected to generate 0.9 times more return on investment than CCL Products. However, UltraTech Cement Limited is 1.11 times less risky than CCL Products. It trades about 0.01 of its potential returns per unit of risk. CCL Products Limited is currently generating about -0.21 per unit of risk. If you would invest  1,141,910  in UltraTech Cement Limited on December 27, 2024 and sell it today you would lose (1,700) from holding UltraTech Cement Limited or give up 0.15% of portfolio value over 90 days.

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

UltraTech Cement Limited  vs.  CCL Products Limited

UltraTech Cement

Risk-Adjusted Performance

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CCL Products Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CCL Products Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with UltraTech Cement and CCL Products

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

The idea behind UltraTech Cement Limited and CCL Products 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.