Correlation Between Blue Coast and Welspun Investments

Can any of the company-specific risk be diversified away by investing in both Blue Coast and Welspun 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 Blue Coast and Welspun Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Coast Hotels and Welspun Investments and, you can compare the effects of market volatilities on Blue Coast and Welspun 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 Blue Coast with a short position of Welspun Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Coast and Welspun Investments.

Diversification Opportunities for Blue Coast and Welspun Investments

-0.64

Correlation Coefficient

Blue Coast  Welspun Investments

Excellent diversification

The 3 months correlation between Blue and Welspun is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels and Welspun Investments and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welspun Investments and and Blue Coast 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 Blue Coast Hotels are associated (or correlated) with Welspun Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welspun Investments and has no effect on the direction of Blue Coast i.e., Blue Coast and Welspun Investments go up and down completely randomly.

Pair Corralation between Blue Coast and Welspun Investments

Assuming the 90 days trading horizon Blue Coast Hotels is expected to generate 0.57 times more return on investment than Welspun Investments. However, Blue Coast Hotels is 1.76 times less risky than Welspun Investments. It trades about 0.6 of its potential returns per unit of risk. Welspun Investments and is currently generating about 0.01 per unit of risk. If you would invest  1,424  in Blue Coast Hotels on December 25, 2024 and sell it today you would earn a total of  2,634  from holding Blue Coast Hotels or generate 184.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Blue Coast Hotels  vs.  Welspun Investments and

Blue Coast Hotels

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 47 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Blue Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Welspun Investments and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Welspun Investments and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Welspun Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blue Coast and Welspun Investments

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

The idea behind Blue Coast Hotels and Welspun Investments and 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.