Correlation Between UPL and Khaitan Chemicals

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

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

Diversification Opportunities for UPL and Khaitan Chemicals

0.85

Correlation Coefficient

UPL  Khaitan Chemicals

Very poor diversification

The 3 months correlation between UPL and Khaitan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding UPL Limited and Khaitan Chemicals Fertilizers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khaitan Chemicals and UPL 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 UPL Limited are associated (or correlated) with Khaitan Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khaitan Chemicals has no effect on the direction of UPL i.e., UPL and Khaitan Chemicals go up and down completely randomly.

Pair Corralation between UPL and Khaitan Chemicals

Assuming the 90 days trading horizon UPL Limited is expected to under-perform the Khaitan Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, UPL Limited is 2.12 times less risky than Khaitan Chemicals. The stock trades about -0.27 of its potential returns per unit of risk. The Khaitan Chemicals Fertilizers is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,882  in Khaitan Chemicals Fertilizers on September 23, 2024 and sell it today you would earn a total of  187.00  from holding Khaitan Chemicals Fertilizers or generate 2.72% return on investment over 90 days.

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

UPL Limited  vs.  Khaitan Chemicals Fertilizers

UPL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Khaitan Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Khaitan Chemicals Fertilizers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with UPL and Khaitan Chemicals

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

The idea behind UPL Limited and Khaitan Chemicals Fertilizers 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.