Correlation Between Persistent Systems and Unitech

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

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

Diversification Opportunities for Persistent Systems and Unitech

-0.3

Correlation Coefficient

Persistent Systems  Unitech

Very good diversification

The 3 months correlation between Persistent and Unitech is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Persistent Systems Limited and Unitech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unitech Limited and Persistent Systems 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 Persistent Systems Limited are associated (or correlated) with Unitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unitech Limited has no effect on the direction of Persistent Systems i.e., Persistent Systems and Unitech go up and down completely randomly.

Pair Corralation between Persistent Systems and Unitech

Assuming the 90 days trading horizon Persistent Systems Limited is expected to generate 0.66 times more return on investment than Unitech. However, Persistent Systems Limited is 1.52 times less risky than Unitech. It trades about 0.15 of its potential returns per unit of risk. Unitech Limited is currently generating about 0.03 per unit of risk. If you would invest  530,470  in Persistent Systems Limited on September 14, 2024 and sell it today you would earn a total of  113,125  from holding Persistent Systems Limited or generate 21.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Persistent Systems Limited  vs.  Unitech Limited

Persistent Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Persistent Systems Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Persistent Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Unitech Limited

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unitech Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Unitech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Persistent Systems and Unitech

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

The idea behind Persistent Systems Limited and Unitech 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.