Correlation Between United Spirits and Allied Blenders

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

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

Diversification Opportunities for United Spirits and Allied Blenders

0.4

Correlation Coefficient

United Spirits  Allied Blenders

Very weak diversification

The 3 months correlation between United and Allied is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United Spirits Limited and Allied Blenders Distillers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Blenders Dist and United Spirits 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 United Spirits Limited are associated (or correlated) with Allied Blenders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Blenders Dist has no effect on the direction of United Spirits i.e., United Spirits and Allied Blenders go up and down completely randomly.

Pair Corralation between United Spirits and Allied Blenders

Assuming the 90 days trading horizon United Spirits Limited is expected to generate 0.55 times more return on investment than Allied Blenders. However, United Spirits Limited is 1.83 times less risky than Allied Blenders. It trades about 0.05 of its potential returns per unit of risk. Allied Blenders Distillers is currently generating about -0.01 per unit of risk. If you would invest  148,500  in United Spirits Limited on September 5, 2024 and sell it today you would earn a total of  5,795  from holding United Spirits Limited or generate 3.9% return on investment over 90 days.

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

United Spirits Limited  vs.  Allied Blenders Distillers

United Spirits

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Spirits Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, United Spirits is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Allied Blenders Dist

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Blenders Distillers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Blenders is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Spirits and Allied Blenders

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

The idea behind United Spirits Limited and Allied Blenders Distillers 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 CEOs Directory module to screen CEOs from public companies around the world.