Correlation Between Apollo Hospitals and Ortel Communications

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

Diversification Opportunities for Apollo Hospitals and Ortel Communications

0.48

Correlation Coefficient

Apollo Hospitals  Ortel Communications

Very weak diversification

The 3 months correlation between Apollo and Ortel is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Hospitals Enterprise and Ortel Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ortel Communications 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 Ortel Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ortel Communications has no effect on the direction of Apollo Hospitals i.e., Apollo Hospitals and Ortel Communications go up and down completely randomly.

Pair Corralation between Apollo Hospitals and Ortel Communications

Assuming the 90 days trading horizon Apollo Hospitals is expected to generate 3.02 times less return on investment than Ortel Communications. But when comparing it to its historical volatility, Apollo Hospitals Enterprise is 1.87 times less risky than Ortel Communications. It trades about 0.08 of its potential returns per unit of risk. Ortel Communications Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Ortel Communications Limited on October 9, 2024 and sell it today you would earn a total of  100.00  from holding Ortel Communications Limited or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

Apollo Hospitals Enterprise  vs.  Ortel Communications Limited

Apollo Hospitals Ent

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Hospitals Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Apollo Hospitals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ortel Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ortel Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Apollo Hospitals and Ortel Communications

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

The idea behind Apollo Hospitals Enterprise and Ortel Communications 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.