Correlation Between UltraTech Cement and EIH Associated

Can any of the company-specific risk be diversified away by investing in both UltraTech Cement and EIH Associated 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 EIH Associated 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 EIH Associated Hotels, you can compare the effects of market volatilities on UltraTech Cement and EIH Associated 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 EIH Associated. Check out your portfolio center. Please also check ongoing floating volatility patterns of UltraTech Cement and EIH Associated.

Diversification Opportunities for UltraTech Cement and EIH Associated

0.77

Correlation Coefficient

UltraTech Cement  EIH Associated

Poor diversification

The 3 months correlation between UltraTech and EIH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels 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 EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of UltraTech Cement i.e., UltraTech Cement and EIH Associated go up and down completely randomly.

Pair Corralation between UltraTech Cement and EIH Associated

Assuming the 90 days trading horizon UltraTech Cement Limited is expected to under-perform the EIH Associated. But the stock apears to be less risky and, when comparing its historical volatility, UltraTech Cement Limited is 2.38 times less risky than EIH Associated. The stock trades about -0.19 of its potential returns per unit of risk. The EIH Associated Hotels is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  41,685  in EIH Associated Hotels on October 12, 2024 and sell it today you would lose (1,025) from holding EIH Associated Hotels or give up 2.46% of portfolio value over 90 days.

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

UltraTech Cement Limited  vs.  EIH Associated Hotels

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.

EIH Associated Hotels

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, EIH Associated is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UltraTech Cement and EIH Associated

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

The idea behind UltraTech Cement Limited and EIH Associated Hotels 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.