Correlation Between UltraTech Cement and S P

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

Diversification Opportunities for UltraTech Cement and S P

0.65

Correlation Coefficient

UltraTech Cement  S P

Poor diversification

The 3 months correlation between UltraTech and SPAL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of UltraTech Cement i.e., UltraTech Cement and S P go up and down completely randomly.

Pair Corralation between UltraTech Cement and S P

Assuming the 90 days trading horizon UltraTech Cement is expected to generate 2.99 times less return on investment than S P. But when comparing it to its historical volatility, UltraTech Cement Limited is 2.26 times less risky than S P. It trades about 0.05 of its potential returns per unit of risk. S P Apparels is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  61,875  in S P Apparels on October 9, 2024 and sell it today you would earn a total of  32,945  from holding S P Apparels or generate 53.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

UltraTech Cement Limited  vs.  S P Apparels

UltraTech Cement

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UltraTech Cement Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

S P Apparels

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, S P may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UltraTech Cement and S P

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

The idea behind UltraTech Cement Limited and S P Apparels 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.