Correlation Between Chalet Hotels and Chambal Fertilizers

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

Diversification Opportunities for Chalet Hotels and Chambal Fertilizers

0.56

Correlation Coefficient

Chalet Hotels  Chambal Fertilizers

Very weak diversification

The 3 months correlation between Chalet and Chambal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers 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 Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between Chalet Hotels and Chambal Fertilizers

Assuming the 90 days trading horizon Chalet Hotels is expected to generate 1.47 times less return on investment than Chambal Fertilizers. But when comparing it to its historical volatility, Chalet Hotels Limited is 1.38 times less risky than Chambal Fertilizers. It trades about 0.05 of its potential returns per unit of risk. Chambal Fertilizers Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  38,619  in Chambal Fertilizers Chemicals on October 9, 2024 and sell it today you would earn a total of  9,341  from holding Chambal Fertilizers Chemicals or generate 24.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Chalet Hotels Limited  vs.  Chambal Fertilizers Chemicals

Chalet Hotels Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Chalet Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chambal Fertilizers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chambal Fertilizers Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chambal Fertilizers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chalet Hotels and Chambal Fertilizers

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

The idea behind Chalet Hotels Limited and Chambal Fertilizers Chemicals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.