Correlation Between Abbott India and Juniper Hotels

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

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

Diversification Opportunities for Abbott India and Juniper Hotels

0.64

Correlation Coefficient

Abbott India  Juniper Hotels

Poor diversification

The 3 months correlation between Abbott and Juniper is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Abbott India Limited and Juniper Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Hotels and Abbott India 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 Abbott India Limited are associated (or correlated) with Juniper Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juniper Hotels has no effect on the direction of Abbott India i.e., Abbott India and Juniper Hotels go up and down completely randomly.

Pair Corralation between Abbott India and Juniper Hotels

Assuming the 90 days trading horizon Abbott India Limited is expected to generate 0.56 times more return on investment than Juniper Hotels. However, Abbott India Limited is 1.79 times less risky than Juniper Hotels. It trades about -0.09 of its potential returns per unit of risk. Juniper Hotels is currently generating about -0.1 per unit of risk. If you would invest  2,997,900  in Abbott India Limited on September 2, 2024 and sell it today you would lose (225,560) from holding Abbott India Limited or give up 7.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Abbott India Limited  vs.  Juniper Hotels

Abbott India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abbott India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Juniper Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Abbott India and Juniper Hotels

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

The idea behind Abbott India Limited and Juniper 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.