Correlation Between Cantabil Retail and Asian Hotels

Can any of the company-specific risk be diversified away by investing in both Cantabil Retail and Asian Hotels 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 Cantabil Retail and Asian Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cantabil Retail India and Asian Hotels Limited, you can compare the effects of market volatilities on Cantabil Retail and Asian Hotels 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 Cantabil Retail with a short position of Asian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cantabil Retail and Asian Hotels.

Diversification Opportunities for Cantabil Retail and Asian Hotels

-0.12

Correlation Coefficient

Cantabil Retail  Asian Hotels

Good diversification

The 3 months correlation between Cantabil and Asian is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and Asian Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels Limited and Cantabil Retail 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 Cantabil Retail India are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels Limited has no effect on the direction of Cantabil Retail i.e., Cantabil Retail and Asian Hotels go up and down completely randomly.

Pair Corralation between Cantabil Retail and Asian Hotels

Assuming the 90 days trading horizon Cantabil Retail India is expected to under-perform the Asian Hotels. In addition to that, Cantabil Retail is 1.27 times more volatile than Asian Hotels Limited. It trades about -0.01 of its total potential returns per unit of risk. Asian Hotels Limited is currently generating about 0.16 per unit of volatility. If you would invest  29,071  in Asian Hotels Limited on December 27, 2024 and sell it today you would earn a total of  8,314  from holding Asian Hotels Limited or generate 28.6% return on investment over 90 days.

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

Cantabil Retail India  vs.  Asian Hotels Limited

Cantabil Retail India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cantabil Retail India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Asian Hotels Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cantabil Retail and Asian Hotels

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

The idea behind Cantabil Retail India and Asian Hotels 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.