Correlation Between BH and UTI

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

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

Diversification Opportunities for BH and UTI

0.04

Correlation Coefficient

BH  UTI

Significant diversification

The 3 months correlation between BH and UTI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BH Co and UTI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Inc and BH 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 BH Co are associated (or correlated) with UTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Inc has no effect on the direction of BH i.e., BH and UTI go up and down completely randomly.

Pair Corralation between BH and UTI

Assuming the 90 days trading horizon BH Co is expected to under-perform the UTI. But the stock apears to be less risky and, when comparing its historical volatility, BH Co is 1.19 times less risky than UTI. The stock trades about -0.13 of its potential returns per unit of risk. The UTI Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,285,000  in UTI Inc on September 3, 2024 and sell it today you would earn a total of  25,000  from holding UTI Inc or generate 1.09% return on investment over 90 days.

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

BH Co  vs.  UTI Inc

BH Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

UTI Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BH and UTI

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

The idea behind BH Co and UTI Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.