Correlation Between Advani Hotels and JM Financial

Can any of the company-specific risk be diversified away by investing in both Advani Hotels and JM Financial 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 JM Financial 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 JM Financial Limited, you can compare the effects of market volatilities on Advani Hotels and JM Financial 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 JM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advani Hotels and JM Financial.

Diversification Opportunities for Advani Hotels and JM Financial

-0.09

Correlation Coefficient

Advani Hotels  JM Financial

Good diversification

The 3 months correlation between Advani and JMFINANCIL is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial Limited 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 JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of Advani Hotels i.e., Advani Hotels and JM Financial go up and down completely randomly.

Pair Corralation between Advani Hotels and JM Financial

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to under-perform the JM Financial. But the stock apears to be less risky and, when comparing its historical volatility, Advani Hotels Resorts is 1.48 times less risky than JM Financial. The stock trades about -0.03 of its potential returns per unit of risk. The JM Financial Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12,776  in JM Financial Limited on September 12, 2024 and sell it today you would earn a total of  1,311  from holding JM Financial Limited or generate 10.26% return on investment over 90 days.

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

Advani Hotels Resorts  vs.  JM Financial 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 recent stock price confusion, may contribute to short-horizon losses for the traders.

JM Financial Limited

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, JM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advani Hotels and JM Financial

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

The idea behind Advani Hotels Resorts and JM Financial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.