Correlation Between UTI and Interflex

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

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

Diversification Opportunities for UTI and Interflex

-0.06

Correlation Coefficient

UTI  Interflex

Good diversification

The 3 months correlation between UTI and Interflex is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding UTI Inc and Interflex Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interflex and UTI 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 Inc are associated (or correlated) with Interflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interflex has no effect on the direction of UTI i.e., UTI and Interflex go up and down completely randomly.

Pair Corralation between UTI and Interflex

Assuming the 90 days trading horizon UTI Inc is expected to generate 1.65 times more return on investment than Interflex. However, UTI is 1.65 times more volatile than Interflex Co. It trades about 0.03 of its potential returns per unit of risk. Interflex Co is currently generating about -0.25 per unit of risk. If you would invest  2,230,000  in UTI Inc on September 1, 2024 and sell it today you would earn a total of  80,000  from holding UTI Inc or generate 3.59% return on investment over 90 days.

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

UTI Inc  vs.  Interflex Co

UTI Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UTI may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Interflex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interflex 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with UTI and Interflex

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

The idea behind UTI Inc and Interflex Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.