Correlation Between Chalet Hotels and Advani Hotels

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

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

Diversification Opportunities for Chalet Hotels and Advani Hotels

0.85

Correlation Coefficient

Chalet Hotels  Advani Hotels

Very poor diversification

The 3 months correlation between Chalet and Advani is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Advani Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advani Hotels Resorts and Chalet 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 Chalet Hotels Limited are associated (or correlated) with Advani Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advani Hotels Resorts has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Advani Hotels go up and down completely randomly.

Pair Corralation between Chalet Hotels and Advani Hotels

Assuming the 90 days trading horizon Chalet Hotels Limited is expected to under-perform the Advani Hotels. In addition to that, Chalet Hotels is 1.09 times more volatile than Advani Hotels Resorts. It trades about -0.13 of its total potential returns per unit of risk. Advani Hotels Resorts is currently generating about -0.1 per unit of volatility. If you would invest  6,991  in Advani Hotels Resorts on November 29, 2024 and sell it today you would lose (1,037) from holding Advani Hotels Resorts or give up 14.83% of portfolio value over 90 days.

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

Chalet Hotels Limited  vs.  Advani Hotels Resorts

Chalet Hotels Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chalet Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Advani Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advani Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Chalet Hotels and Advani Hotels

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

The idea behind Chalet Hotels Limited and Advani Hotels Resorts 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.