Correlation Between Asian Hotels and Univa Foods

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

Diversification Opportunities for Asian Hotels and Univa Foods

0.79

Correlation Coefficient

Asian Hotels  Univa Foods

Poor diversification

The 3 months correlation between Asian and Univa is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Univa Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univa Foods 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 Univa Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univa Foods Limited has no effect on the direction of Asian Hotels i.e., Asian Hotels and Univa Foods go up and down completely randomly.

Pair Corralation between Asian Hotels and Univa Foods

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 4.27 times more return on investment than Univa Foods. However, Asian Hotels is 4.27 times more volatile than Univa Foods Limited. It trades about 0.26 of its potential returns per unit of risk. Univa Foods Limited is currently generating about 0.18 per unit of risk. If you would invest  17,571  in Asian Hotels Limited on October 25, 2024 and sell it today you would earn a total of  12,779  from holding Asian Hotels Limited or generate 72.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Asian Hotels Limited  vs.  Univa Foods Limited

Asian Hotels Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Univa Foods Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univa Foods Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Univa Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Asian Hotels and Univa Foods

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

The idea behind Asian Hotels Limited and Univa Foods 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.