Correlation Between Varun Beverages and UTI Asset

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

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

Diversification Opportunities for Varun Beverages and UTI Asset

0.48

Correlation Coefficient

Varun Beverages  UTI Asset

Very weak diversification

The 3 months correlation between Varun and UTI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and UTI Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Asset Management and Varun Beverages 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 Varun Beverages Limited are associated (or correlated) with UTI Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Asset Management has no effect on the direction of Varun Beverages i.e., Varun Beverages and UTI Asset go up and down completely randomly.

Pair Corralation between Varun Beverages and UTI Asset

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 4.71 times more return on investment than UTI Asset. However, Varun Beverages is 4.71 times more volatile than UTI Asset Management. It trades about 0.04 of its potential returns per unit of risk. UTI Asset Management is currently generating about 0.08 per unit of risk. If you would invest  50,605  in Varun Beverages Limited on October 10, 2024 and sell it today you would earn a total of  10,090  from holding Varun Beverages Limited or generate 19.94% return on investment over 90 days.

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

Varun Beverages Limited  vs.  UTI Asset Management

Varun Beverages

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Varun Beverages and UTI Asset

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

The idea behind Varun Beverages Limited and UTI Asset Management 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.