Correlation Between UTI Asset and Centum Electronics

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

By analyzing existing cross correlation between UTI Asset Management and Centum Electronics Limited, you can compare the effects of market volatilities on UTI Asset and Centum Electronics 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 UTI Asset with a short position of Centum Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of UTI Asset and Centum Electronics.

Diversification Opportunities for UTI Asset and Centum Electronics

0.91

Correlation Coefficient

UTI Asset  Centum Electronics

Almost no diversification

The 3 months correlation between UTI and Centum is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and Centum Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centum Electronics and UTI Asset 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 UTI Asset Management are associated (or correlated) with Centum Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centum Electronics has no effect on the direction of UTI Asset i.e., UTI Asset and Centum Electronics go up and down completely randomly.

Pair Corralation between UTI Asset and Centum Electronics

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 0.9 times more return on investment than Centum Electronics. However, UTI Asset Management is 1.11 times less risky than Centum Electronics. It trades about -0.06 of its potential returns per unit of risk. Centum Electronics Limited is currently generating about -0.14 per unit of risk. If you would invest  123,090  in UTI Asset Management on December 23, 2024 and sell it today you would lose (16,070) from holding UTI Asset Management or give up 13.06% of portfolio value over 90 days.

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

UTI Asset Management  vs.  Centum Electronics Limited

UTI Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days UTI Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Centum Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centum Electronics 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with UTI Asset and Centum Electronics

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

The idea behind UTI Asset Management and Centum Electronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.