Correlation Between Advani Hotels and Capacite Infraprojects

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

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

Diversification Opportunities for Advani Hotels and Capacite Infraprojects

0.62

Correlation Coefficient

Advani Hotels  Capacite Infraprojects

Poor diversification

The 3 months correlation between Advani and Capacite is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects and Advani Hotels 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 Advani Hotels Resorts are associated (or correlated) with Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Advani Hotels i.e., Advani Hotels and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Advani Hotels and Capacite Infraprojects

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to under-perform the Capacite Infraprojects. But the stock apears to be less risky and, when comparing its historical volatility, Advani Hotels Resorts is 1.33 times less risky than Capacite Infraprojects. The stock trades about -0.02 of its potential returns per unit of risk. The Capacite Infraprojects Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  34,640  in Capacite Infraprojects Limited on October 26, 2024 and sell it today you would earn a total of  1,410  from holding Capacite Infraprojects Limited or generate 4.07% return on investment over 90 days.

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

Advani Hotels Resorts  vs.  Capacite Infraprojects Limited

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advani Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Advani Hotels is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Capacite Infraprojects

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, Capacite Infraprojects may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Advani Hotels and Capacite Infraprojects

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

The idea behind Advani Hotels Resorts and Capacite Infraprojects 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.