Correlation Between UltraTech Cement and Styrenix Performance

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

Diversification Opportunities for UltraTech Cement and Styrenix Performance

0.67

Correlation Coefficient

UltraTech Cement  Styrenix Performance

Poor diversification

The 3 months correlation between UltraTech and Styrenix is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance 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 Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of UltraTech Cement i.e., UltraTech Cement and Styrenix Performance go up and down completely randomly.

Pair Corralation between UltraTech Cement and Styrenix Performance

Assuming the 90 days trading horizon UltraTech Cement Limited is expected to under-perform the Styrenix Performance. But the stock apears to be less risky and, when comparing its historical volatility, UltraTech Cement Limited is 1.05 times less risky than Styrenix Performance. The stock trades about -0.15 of its potential returns per unit of risk. The Styrenix Performance Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  288,902  in Styrenix Performance Materials on October 11, 2024 and sell it today you would earn a total of  9,508  from holding Styrenix Performance Materials or generate 3.29% return on investment over 90 days.

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

UltraTech Cement Limited  vs.  Styrenix Performance Materials

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.

Styrenix Performance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UltraTech Cement and Styrenix Performance

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

The idea behind UltraTech Cement Limited and Styrenix Performance Materials 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.