Correlation Between UTI Asset and Lemon Tree

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

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

Diversification Opportunities for UTI Asset and Lemon Tree

-0.11

Correlation Coefficient

UTI Asset  Lemon Tree

Good diversification

The 3 months correlation between UTI and Lemon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset Management and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels and UTI Asset 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 Asset Management are associated (or correlated) with Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of UTI Asset i.e., UTI Asset and Lemon Tree go up and down completely randomly.

Pair Corralation between UTI Asset and Lemon Tree

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 1.46 times more return on investment than Lemon Tree. However, UTI Asset is 1.46 times more volatile than Lemon Tree Hotels. It trades about 0.07 of its potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.0 per unit of risk. If you would invest  119,220  in UTI Asset Management on September 2, 2024 and sell it today you would earn a total of  10,695  from holding UTI Asset Management or generate 8.97% return on investment over 90 days.

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

UTI Asset Management  vs.  Lemon Tree Hotels

UTI Asset Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UTI Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lemon Tree Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lemon Tree Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Lemon Tree is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with UTI Asset and Lemon Tree

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

The idea behind UTI Asset Management and Lemon Tree Hotels 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.