Correlation Between Chalet Hotels and Garware Hi

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

Diversification Opportunities for Chalet Hotels and Garware Hi

0.77

Correlation Coefficient

Chalet Hotels  Garware Hi

Poor diversification

The 3 months correlation between Chalet and Garware is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Garware Hi Tech Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garware Hi Tech 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 Garware Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garware Hi Tech has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Garware Hi go up and down completely randomly.

Pair Corralation between Chalet Hotels and Garware Hi

Assuming the 90 days trading horizon Chalet Hotels Limited is expected to under-perform the Garware Hi. But the stock apears to be less risky and, when comparing its historical volatility, Chalet Hotels Limited is 1.53 times less risky than Garware Hi. The stock trades about -0.04 of its potential returns per unit of risk. The Garware Hi Tech Films is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  354,875  in Garware Hi Tech Films on October 25, 2024 and sell it today you would earn a total of  35,330  from holding Garware Hi Tech Films or generate 9.96% return on investment over 90 days.

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

Chalet Hotels Limited  vs.  Garware Hi Tech Films

Chalet Hotels Limited

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Garware Hi Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chalet Hotels and Garware Hi

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

The idea behind Chalet Hotels Limited and Garware Hi Tech Films 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.