Correlation Between Asian Hotels and Indian Hotels

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

Diversification Opportunities for Asian Hotels and Indian Hotels

-0.47

Correlation Coefficient

Asian Hotels  Indian Hotels

Very good diversification

The 3 months correlation between Asian and Indian is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels 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 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 Asian Hotels i.e., Asian Hotels and Indian Hotels go up and down completely randomly.

Pair Corralation between Asian Hotels and Indian Hotels

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.14 times more return on investment than Indian Hotels. However, Asian Hotels is 1.14 times more volatile than The Indian Hotels. It trades about 0.12 of its potential returns per unit of risk. The Indian Hotels is currently generating about -0.07 per unit of risk. If you would invest  30,524  in Asian Hotels Limited on December 28, 2024 and sell it today you would earn a total of  5,706  from holding Asian Hotels Limited or generate 18.69% return on investment over 90 days.

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

Asian Hotels Limited  vs.  The Indian Hotels

Asian Hotels Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Indian Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Indian Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Asian Hotels and Indian Hotels

The main advantage of trading using opposite Asian Hotels and Indian Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asian Hotels 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 Asian Hotels Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.