Correlation Between Asian Hotels and Cholamandalam Investment

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

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

Diversification Opportunities for Asian Hotels and Cholamandalam Investment

-0.28

Correlation Coefficient

Asian Hotels  Cholamandalam Investment

Very good diversification

The 3 months correlation between Asian and Cholamandalam is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment and Asian 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 Asian Hotels Limited are associated (or correlated) with Cholamandalam Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Investment has no effect on the direction of Asian Hotels i.e., Asian Hotels and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between Asian Hotels and Cholamandalam Investment

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 2.25 times more return on investment than Cholamandalam Investment. However, Asian Hotels is 2.25 times more volatile than Cholamandalam Investment and. It trades about 0.23 of its potential returns per unit of risk. Cholamandalam Investment and is currently generating about -0.14 per unit of risk. If you would invest  19,752  in Asian Hotels Limited on September 25, 2024 and sell it today you would earn a total of  4,220  from holding Asian Hotels Limited or generate 21.36% return on investment over 90 days.

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

Asian Hotels Limited  vs.  Cholamandalam Investment and

Asian Hotels Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Cholamandalam Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Asian Hotels and Cholamandalam Investment

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

The idea behind Asian Hotels Limited and Cholamandalam Investment and 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.