Correlation Between Asian Hotels and DMCC SPECIALITY

Can any of the company-specific risk be diversified away by investing in both Asian Hotels and DMCC SPECIALITY 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 DMCC SPECIALITY 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 DMCC SPECIALITY CHEMICALS, you can compare the effects of market volatilities on Asian Hotels and DMCC SPECIALITY 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 DMCC SPECIALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Hotels and DMCC SPECIALITY.

Diversification Opportunities for Asian Hotels and DMCC SPECIALITY

0.41

Correlation Coefficient

Asian Hotels  DMCC SPECIALITY

Very weak diversification

The 3 months correlation between Asian and DMCC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and DMCC SPECIALITY CHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCC SPECIALITY CHEMICALS 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 DMCC SPECIALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCC SPECIALITY CHEMICALS has no effect on the direction of Asian Hotels i.e., Asian Hotels and DMCC SPECIALITY go up and down completely randomly.

Pair Corralation between Asian Hotels and DMCC SPECIALITY

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.1 times more return on investment than DMCC SPECIALITY. However, Asian Hotels is 1.1 times more volatile than DMCC SPECIALITY CHEMICALS. It trades about 0.08 of its potential returns per unit of risk. DMCC SPECIALITY CHEMICALS is currently generating about 0.04 per unit of risk. If you would invest  8,155  in Asian Hotels Limited on September 23, 2024 and sell it today you would earn a total of  13,638  from holding Asian Hotels Limited or generate 167.23% return on investment over 90 days.

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

Asian Hotels Limited  vs.  DMCC SPECIALITY CHEMICALS

Asian Hotels Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 8 (%) 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.

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DMCC SPECIALITY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asian Hotels and DMCC SPECIALITY

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

The idea behind Asian Hotels Limited and DMCC SPECIALITY CHEMICALS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.