Correlation Between UTI Asset and Wipro

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

Diversification Opportunities for UTI Asset and Wipro

0.08

Correlation Coefficient

UTI Asset  Wipro

Significant diversification

The 3 months correlation between UTI and Wipro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and Wipro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited has no effect on the direction of UTI Asset i.e., UTI Asset and Wipro go up and down completely randomly.

Pair Corralation between UTI Asset and Wipro

Assuming the 90 days trading horizon UTI Asset is expected to generate 34.77 times less return on investment than Wipro. But when comparing it to its historical volatility, UTI Asset Management is 5.07 times less risky than Wipro. It trades about 0.01 of its potential returns per unit of risk. Wipro Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  27,380  in Wipro Limited on October 24, 2024 and sell it today you would earn a total of  2,455  from holding Wipro Limited or generate 8.97% return on investment over 90 days.

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

UTI Asset Management  vs.  Wipro Limited

UTI Asset Management

Risk-Adjusted Performance

0 of 100

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 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.

Wipro Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Wipro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UTI Asset and Wipro

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

The idea behind UTI Asset Management and Wipro 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.