Correlation Between Advani Hotels and NMDC

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

Diversification Opportunities for Advani Hotels and NMDC

0.81

Correlation Coefficient

Advani Hotels  NMDC

Very poor diversification

The 3 months correlation between Advani and NMDC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC 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 NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Advani Hotels i.e., Advani Hotels and NMDC go up and down completely randomly.

Pair Corralation between Advani Hotels and NMDC

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to generate 0.93 times more return on investment than NMDC. However, Advani Hotels Resorts is 1.08 times less risky than NMDC. It trades about -0.13 of its potential returns per unit of risk. NMDC Limited is currently generating about -0.12 per unit of risk. If you would invest  6,929  in Advani Hotels Resorts on December 2, 2024 and sell it today you would lose (1,269) from holding Advani Hotels Resorts or give up 18.31% of portfolio value over 90 days.

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

Advani Hotels Resorts  vs.  NMDC Limited

Advani Hotels Resorts

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NMDC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days NMDC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Advani Hotels and NMDC

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

The idea behind Advani Hotels Resorts and NMDC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.