Correlation Between UTI Asset and Reliance Power

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

Diversification Opportunities for UTI Asset and Reliance Power

0.71

Correlation Coefficient

UTI Asset  Reliance Power

Poor diversification

The 3 months correlation between UTI and Reliance is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and Reliance Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Power 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 Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Power has no effect on the direction of UTI Asset i.e., UTI Asset and Reliance Power go up and down completely randomly.

Pair Corralation between UTI Asset and Reliance Power

Assuming the 90 days trading horizon UTI Asset Management is expected to under-perform the Reliance Power. But the stock apears to be less risky and, when comparing its historical volatility, UTI Asset Management is 1.17 times less risky than Reliance Power. The stock trades about -0.06 of its potential returns per unit of risk. The Reliance Power Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,379  in Reliance Power Limited on December 23, 2024 and sell it today you would lose (597.00) from holding Reliance Power Limited or give up 13.63% 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 Power 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 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 Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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.

Pair Trading with UTI Asset and Reliance Power

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

The idea behind UTI Asset Management and Reliance Power 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.