Correlation Between UTI Asset and KEI Industries

Can any of the company-specific risk be diversified away by investing in both UTI Asset and KEI Industries 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 KEI Industries 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 KEI Industries Limited, you can compare the effects of market volatilities on UTI Asset and KEI Industries 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 KEI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of UTI Asset and KEI Industries.

Diversification Opportunities for UTI Asset and KEI Industries

0.51

Correlation Coefficient

UTI Asset  KEI Industries

Very weak diversification

The 3 months correlation between UTI and KEI is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of UTI Asset i.e., UTI Asset and KEI Industries go up and down completely randomly.

Pair Corralation between UTI Asset and KEI Industries

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 1.43 times more return on investment than KEI Industries. However, UTI Asset is 1.43 times more volatile than KEI Industries Limited. It trades about 0.03 of its potential returns per unit of risk. KEI Industries Limited is currently generating about 0.03 per unit of risk. If you would invest  122,605  in UTI Asset Management on October 23, 2024 and sell it today you would earn a total of  2,415  from holding UTI Asset Management or generate 1.97% return on investment over 90 days.

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

UTI Asset Management  vs.  KEI Industries Limited

UTI Asset Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UTI Asset is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

KEI Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEI Industries Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, KEI Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UTI Asset and KEI Industries

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

The idea behind UTI Asset Management and KEI Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.