Correlation Between Asian Hotels and NMDC

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

Diversification Opportunities for Asian Hotels and NMDC

-0.59

Correlation Coefficient

Asian Hotels  NMDC

Excellent diversification

The 3 months correlation between Asian and NMDC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited 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 NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Asian Hotels i.e., Asian Hotels and NMDC go up and down completely randomly.

Pair Corralation between Asian Hotels and NMDC

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.08 times more return on investment than NMDC. However, Asian Hotels is 1.08 times more volatile than NMDC Limited. It trades about 0.25 of its potential returns per unit of risk. NMDC Limited is currently generating about 0.02 per unit of risk. If you would invest  26,369  in Asian Hotels Limited on December 24, 2024 and sell it today you would earn a total of  13,401  from holding Asian Hotels Limited or generate 50.82% 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.  NMDC Limited

Asian Hotels Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

NMDC Limited

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMDC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NMDC is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Asian Hotels and NMDC

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

The idea behind Asian Hotels Limited and NMDC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.