Correlation Between UTI Mutual and Parag Milk

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

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

Diversification Opportunities for UTI Mutual and Parag Milk

-0.03

Correlation Coefficient

UTI Mutual  Parag Milk

Good diversification

The 3 months correlation between UTI and Parag is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding UTI Mutual Fund and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods and UTI Mutual 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 Mutual Fund are associated (or correlated) with Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of UTI Mutual i.e., UTI Mutual and Parag Milk go up and down completely randomly.

Pair Corralation between UTI Mutual and Parag Milk

Assuming the 90 days trading horizon UTI Mutual is expected to generate 4.4 times less return on investment than Parag Milk. But when comparing it to its historical volatility, UTI Mutual Fund is 3.02 times less risky than Parag Milk. It trades about 0.09 of its potential returns per unit of risk. Parag Milk Foods is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  17,784  in Parag Milk Foods on July 6, 2024 and sell it today you would earn a total of  3,314  from holding Parag Milk Foods or generate 18.63% return on investment over 90 days.

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

UTI Mutual Fund  vs.  Parag Milk Foods

UTI Mutual Fund

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Mutual Fund are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, UTI Mutual is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Parag Milk Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UTI Mutual and Parag Milk

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

The idea behind UTI Mutual Fund and Parag Milk Foods 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.