Correlation Between Apollo Hospitals and Indian Hotels

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

By analyzing existing cross correlation between Apollo Hospitals Enterprise and The Indian Hotels, you can compare the effects of market volatilities on Apollo Hospitals and Indian 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 Apollo Hospitals with a short position of Indian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apollo Hospitals and Indian Hotels.

Diversification Opportunities for Apollo Hospitals and Indian Hotels

0.54

Correlation Coefficient

Apollo Hospitals  Indian Hotels

Very weak diversification

The 3 months correlation between Apollo and Indian is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Hospitals Enterprise and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels and Apollo Hospitals 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 Apollo Hospitals Enterprise are associated (or correlated) with Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of Apollo Hospitals i.e., Apollo Hospitals and Indian Hotels go up and down completely randomly.

Pair Corralation between Apollo Hospitals and Indian Hotels

Assuming the 90 days trading horizon Apollo Hospitals is expected to generate 1.73 times less return on investment than Indian Hotels. But when comparing it to its historical volatility, Apollo Hospitals Enterprise is 1.07 times less risky than Indian Hotels. It trades about 0.27 of its potential returns per unit of risk. The Indian Hotels is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  77,855  in The Indian Hotels on September 29, 2024 and sell it today you would earn a total of  8,205  from holding The Indian Hotels or generate 10.54% return on investment over 90 days.

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

Apollo Hospitals Enterprise  vs.  The Indian Hotels

Apollo Hospitals Ent

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Hospitals Enterprise are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Apollo Hospitals is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Indian Hotels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apollo Hospitals and Indian Hotels

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

The idea behind Apollo Hospitals Enterprise and The Indian Hotels 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.