Correlation Between UTI Asset and Reliance Infrastructure

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

Diversification Opportunities for UTI Asset and Reliance Infrastructure

0.73

Correlation Coefficient

UTI Asset  Reliance Infrastructure

Poor diversification

The 3 months correlation between UTI and Reliance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and Reliance Infrastructure Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Infrastructure 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 Reliance Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Infrastructure has no effect on the direction of UTI Asset i.e., UTI Asset and Reliance Infrastructure go up and down completely randomly.

Pair Corralation between UTI Asset and Reliance Infrastructure

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 0.87 times more return on investment than Reliance Infrastructure. However, UTI Asset Management is 1.15 times less risky than Reliance Infrastructure. It trades about -0.06 of its potential returns per unit of risk. Reliance Infrastructure Limited is currently generating about -0.09 per unit of risk. If you would invest  122,645  in UTI Asset Management on December 26, 2024 and sell it today you would lose (16,865) from holding UTI Asset Management or give up 13.75% of portfolio value over 90 days.

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

UTI Asset Management  vs.  Reliance Infrastructure Limite

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 weak 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.

Reliance Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Infrastructure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with UTI Asset and Reliance Infrastructure

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

The idea behind UTI Asset Management and Reliance Infrastructure 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.