Correlation Between Aarti Drugs and Samhi Hotels

Can any of the company-specific risk be diversified away by investing in both Aarti Drugs and Samhi Hotels 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 Aarti Drugs and Samhi Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aarti Drugs Limited and Samhi Hotels Limited, you can compare the effects of market volatilities on Aarti Drugs and Samhi Hotels 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 Aarti Drugs with a short position of Samhi Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarti Drugs and Samhi Hotels.

Diversification Opportunities for Aarti Drugs and Samhi Hotels

-0.08

Correlation Coefficient

Aarti Drugs  Samhi Hotels

Good diversification

The 3 months correlation between Aarti and Samhi is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aarti Drugs Limited and Samhi Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhi Hotels Limited and Aarti Drugs 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 Aarti Drugs Limited are associated (or correlated) with Samhi Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhi Hotels Limited has no effect on the direction of Aarti Drugs i.e., Aarti Drugs and Samhi Hotels go up and down completely randomly.

Pair Corralation between Aarti Drugs and Samhi Hotels

Assuming the 90 days trading horizon Aarti Drugs is expected to generate 3.49 times less return on investment than Samhi Hotels. But when comparing it to its historical volatility, Aarti Drugs Limited is 1.04 times less risky than Samhi Hotels. It trades about 0.01 of its potential returns per unit of risk. Samhi Hotels Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,340  in Samhi Hotels Limited on October 13, 2024 and sell it today you would earn a total of  4,688  from holding Samhi Hotels Limited or generate 32.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.12%
Values	Daily Returns

Aarti Drugs Limited  vs.  Samhi Hotels Limited

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Samhi Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhi Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Samhi Hotels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aarti Drugs and Samhi Hotels

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

The idea behind Aarti Drugs Limited and Samhi Hotels 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..