Correlation Between Union Bank and Mangalam Organics

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

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

Diversification Opportunities for Union Bank and Mangalam Organics

-0.65

Correlation Coefficient

Union Bank  Mangalam Organics

Excellent diversification

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

Pair Corralation between Union Bank and Mangalam Organics

Assuming the 90 days trading horizon Union Bank of is expected to generate 0.81 times more return on investment than Mangalam Organics. However, Union Bank of is 1.23 times less risky than Mangalam Organics. It trades about 0.05 of its potential returns per unit of risk. Mangalam Organics Limited is currently generating about 0.01 per unit of risk. If you would invest  7,818  in Union Bank of on October 6, 2024 and sell it today you would earn a total of  4,588  from holding Union Bank of or generate 58.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Union Bank of  vs.  Mangalam Organics Limited

Union Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mangalam Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mangalam Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Union Bank and Mangalam Organics

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

The idea behind Union Bank of and Mangalam Organics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.