Correlation Between Aitken Spence and Renuka City

Can any of the company-specific risk be diversified away by investing in both Aitken Spence and Renuka City 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 Aitken Spence and Renuka City into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aitken Spence Hotel and Renuka City Hotel, you can compare the effects of market volatilities on Aitken Spence and Renuka City 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 Aitken Spence with a short position of Renuka City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aitken Spence and Renuka City.

Diversification Opportunities for Aitken Spence and Renuka City

0.21

Correlation Coefficient

Aitken Spence  Renuka City

Modest diversification

The 3 months correlation between Aitken and Renuka is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aitken Spence Hotel and Renuka City Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renuka City Hotel and Aitken Spence 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 Aitken Spence Hotel are associated (or correlated) with Renuka City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renuka City Hotel has no effect on the direction of Aitken Spence i.e., Aitken Spence and Renuka City go up and down completely randomly.

Pair Corralation between Aitken Spence and Renuka City

Assuming the 90 days trading horizon Aitken Spence Hotel is expected to under-perform the Renuka City. But the stock apears to be less risky and, when comparing its historical volatility, Aitken Spence Hotel is 1.58 times less risky than Renuka City. The stock trades about -0.03 of its potential returns per unit of risk. The Renuka City Hotel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  41,000  in Renuka City Hotel on December 26, 2024 and sell it today you would earn a total of  6,550  from holding Renuka City Hotel or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Aitken Spence Hotel  vs.  Renuka City Hotel

Aitken Spence Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aitken Spence Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aitken Spence is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Renuka City Hotel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renuka City Hotel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renuka City sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aitken Spence and Renuka City

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

The idea behind Aitken Spence Hotel and Renuka City Hotel 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.