Correlation Between Asian Hotels and Sudarshan Chemical

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

Diversification Opportunities for Asian Hotels and Sudarshan Chemical

0.51

Correlation Coefficient

Asian Hotels  Sudarshan Chemical

Very weak diversification

The 3 months correlation between Asian and Sudarshan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Sudarshan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sudarshan Chemical 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 Sudarshan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sudarshan Chemical has no effect on the direction of Asian Hotels i.e., Asian Hotels and Sudarshan Chemical go up and down completely randomly.

Pair Corralation between Asian Hotels and Sudarshan Chemical

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 1.3 times more return on investment than Sudarshan Chemical. However, Asian Hotels is 1.3 times more volatile than Sudarshan Chemical Industries. It trades about 0.11 of its potential returns per unit of risk. Sudarshan Chemical Industries is currently generating about 0.11 per unit of risk. If you would invest  7,955  in Asian Hotels Limited on October 5, 2024 and sell it today you would earn a total of  24,910  from holding Asian Hotels Limited or generate 313.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Asian Hotels Limited  vs.  Sudarshan Chemical Industries

Asian Hotels Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 15 (%) 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.

Sudarshan Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Sudarshan Chemical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asian Hotels and Sudarshan Chemical

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

The idea behind Asian Hotels Limited and Sudarshan Chemical Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.