Correlation Between Union Bank and TECIL Chemicals

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

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

Diversification Opportunities for Union Bank and TECIL Chemicals

-0.26

Correlation Coefficient

Union Bank  TECIL Chemicals

Very good diversification

The 3 months correlation between Union and TECIL is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and TECIL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECIL Chemicals and Union Bank 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 Union Bank of are associated (or correlated) with TECIL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECIL Chemicals has no effect on the direction of Union Bank i.e., Union Bank and TECIL Chemicals go up and down completely randomly.

Pair Corralation between Union Bank and TECIL Chemicals

Assuming the 90 days trading horizon Union Bank of is expected to generate 0.58 times more return on investment than TECIL Chemicals. However, Union Bank of is 1.74 times less risky than TECIL Chemicals. It trades about 0.05 of its potential returns per unit of risk. TECIL Chemicals and is currently generating about 0.02 per unit of risk. If you would invest  12,321  in Union Bank of on September 14, 2024 and sell it today you would earn a total of  567.00  from holding Union Bank of or generate 4.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Union Bank of  vs.  TECIL Chemicals and

Union Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

TECIL Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TECIL Chemicals and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, TECIL Chemicals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Union Bank and TECIL Chemicals

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

The idea behind Union Bank of and TECIL Chemicals and 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.