Correlation Between City Union and Kothari Petrochemicals

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

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

Diversification Opportunities for City Union and Kothari Petrochemicals

0.65

Correlation Coefficient

City Union  Kothari Petrochemicals

Poor diversification

The 3 months correlation between City and Kothari is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and Kothari Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kothari Petrochemicals and City Union 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 City Union Bank are associated (or correlated) with Kothari Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kothari Petrochemicals has no effect on the direction of City Union i.e., City Union and Kothari Petrochemicals go up and down completely randomly.

Pair Corralation between City Union and Kothari Petrochemicals

Assuming the 90 days trading horizon City Union is expected to generate 2.24 times less return on investment than Kothari Petrochemicals. But when comparing it to its historical volatility, City Union Bank is 1.83 times less risky than Kothari Petrochemicals. It trades about 0.05 of its potential returns per unit of risk. Kothari Petrochemicals Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,701  in Kothari Petrochemicals Limited on March 24, 2025 and sell it today you would earn a total of  10,132  from holding Kothari Petrochemicals Limited or generate 131.57% return on investment over 90 days.

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

City Union Bank  vs.  Kothari Petrochemicals Limited

City Union Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, City Union exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kothari Petrochemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kothari Petrochemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Kothari Petrochemicals is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with City Union and Kothari Petrochemicals

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

The idea behind City Union Bank and Kothari Petrochemicals Limited 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.