Correlation Between Agro Phos and Chalet Hotels

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

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

Diversification Opportunities for Agro Phos and Chalet Hotels

0.64

Correlation Coefficient

Agro Phos  Chalet Hotels

Poor diversification

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

Pair Corralation between Agro Phos and Chalet Hotels

Assuming the 90 days trading horizon Agro Phos India is expected to under-perform the Chalet Hotels. In addition to that, Agro Phos is 1.62 times more volatile than Chalet Hotels Limited. It trades about -0.1 of its total potential returns per unit of risk. Chalet Hotels Limited is currently generating about -0.07 per unit of volatility. If you would invest  97,520  in Chalet Hotels Limited on December 25, 2024 and sell it today you would lose (10,850) from holding Chalet Hotels Limited or give up 11.13% of portfolio value over 90 days.

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

Agro Phos India  vs.  Chalet Hotels Limited

Agro Phos India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Phos India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Chalet Hotels Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chalet Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Agro Phos and Chalet Hotels

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

The idea behind Agro Phos India and Chalet 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.