Correlation Between Asian Hotels and SIL Investments

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

Diversification Opportunities for Asian Hotels and SIL Investments

-0.43

Correlation Coefficient

Asian Hotels  SIL Investments

Very good diversification

The 3 months correlation between Asian and SIL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and SIL Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIL Investments 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 SIL Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIL Investments has no effect on the direction of Asian Hotels i.e., Asian Hotels and SIL Investments go up and down completely randomly.

Pair Corralation between Asian Hotels and SIL Investments

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.95 times more return on investment than SIL Investments. However, Asian Hotels is 1.95 times more volatile than SIL Investments Limited. It trades about 0.29 of its potential returns per unit of risk. SIL Investments Limited is currently generating about -0.07 per unit of risk. If you would invest  23,972  in Asian Hotels Limited on October 22, 2024 and sell it today you would earn a total of  5,948  from holding Asian Hotels Limited or generate 24.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Asian Hotels Limited  vs.  SIL Investments Limited

Asian Hotels Limited

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

SIL Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIL Investments Limited 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 forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Asian Hotels and SIL Investments

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

The idea behind Asian Hotels Limited and SIL Investments 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..