Correlation Between UTI Asset and MIRC Electronics

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

Diversification Opportunities for UTI Asset and MIRC Electronics

0.31

Correlation Coefficient

UTI Asset  MIRC Electronics

Weak diversification

The 3 months correlation between UTI and MIRC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and MIRC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRC 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 MIRC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRC Electronics has no effect on the direction of UTI Asset i.e., UTI Asset and MIRC Electronics go up and down completely randomly.

Pair Corralation between UTI Asset and MIRC Electronics

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 0.96 times more return on investment than MIRC Electronics. However, UTI Asset Management is 1.04 times less risky than MIRC Electronics. It trades about 0.04 of its potential returns per unit of risk. MIRC Electronics Limited is currently generating about 0.03 per unit of risk. If you would invest  123,010  in UTI Asset Management on October 10, 2024 and sell it today you would earn a total of  6,610  from holding UTI Asset Management or generate 5.37% return on investment over 90 days.

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

UTI Asset Management  vs.  MIRC Electronics Limited

UTI Asset Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, UTI Asset may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MIRC Electronics

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MIRC Electronics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, MIRC Electronics 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 MIRC Electronics

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

The idea behind UTI Asset Management and MIRC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.