Correlation Between Utron and Unitronics

Can any of the company-specific risk be diversified away by investing in both Utron and Unitronics 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 Utron and Unitronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Utron and Unitronics, you can compare the effects of market volatilities on Utron and Unitronics 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 Utron with a short position of Unitronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utron and Unitronics.

Diversification Opportunities for Utron and Unitronics

0.75

Correlation Coefficient

Utron  Unitronics

Poor diversification

The 3 months correlation between Utron and Unitronics is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Utron and Unitronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unitronics and Utron 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 Utron are associated (or correlated) with Unitronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unitronics has no effect on the direction of Utron i.e., Utron and Unitronics go up and down completely randomly.

Pair Corralation between Utron and Unitronics

Assuming the 90 days trading horizon Utron is expected to generate 1.92 times less return on investment than Unitronics. In addition to that, Utron is 1.4 times more volatile than Unitronics. It trades about 0.04 of its total potential returns per unit of risk. Unitronics is currently generating about 0.1 per unit of volatility. If you would invest  126,019  in Unitronics on December 2, 2024 and sell it today you would earn a total of  152,081  from holding Unitronics or generate 120.68% return on investment over 90 days.

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

Utron  vs.  Unitronics

Utron

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Utron are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Utron sustained solid returns over the last few months and may actually be approaching a breakup point.

Unitronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unitronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unitronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Utron and Unitronics

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

The idea behind Utron and Unitronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.