Correlation Between Intops and UIL
Can any of the company-specific risk be diversified away by investing in both Intops and UIL 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 Intops and UIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intops Co and UIL Co, you can compare the effects of market volatilities on Intops and UIL 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 Intops with a short position of UIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intops and UIL.
Diversification Opportunities for Intops and UIL
Very poor diversification
The 3 months correlation between Intops and UIL is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Intops Co and UIL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UIL Co and Intops 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 Intops Co are associated (or correlated) with UIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UIL Co has no effect on the direction of Intops i.e., Intops and UIL go up and down completely randomly.
Pair Corralation between Intops and UIL
Assuming the 90 days trading horizon Intops Co is expected to generate 0.95 times more return on investment than UIL. However, Intops Co is 1.05 times less risky than UIL. It trades about -0.26 of its potential returns per unit of risk. UIL Co is currently generating about -0.36 per unit of risk. If you would invest 2,060,000 in Intops Co on September 3, 2024 and sell it today you would lose (235,000) from holding Intops Co or give up 11.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intops Co vs. UIL Co
Performance |
| Timeline |
| Intops |
| UIL Co |
Intops and UIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intops and UIL
The main advantage of trading using opposite Intops and UIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intops position performs unexpectedly, UIL 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 UIL will offset losses from the drop in UIL's long position.The idea behind Intops Co and UIL Co 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.| UIL vs. Dongsin Engineering Construction | UIL vs. Doosan Fuel Cell | UIL vs. Daishin Balance 1 | UIL vs. Total Soft Bank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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