Correlation Between Chalet Hotels and Kaushalya Infrastructure

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

Diversification Opportunities for Chalet Hotels and Kaushalya Infrastructure

0.25

Correlation Coefficient

Chalet Hotels  Kaushalya Infrastructure

Modest diversification

The 3 months correlation between Chalet and Kaushalya is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Kaushalya Infrastructure Devel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaushalya Infrastructure 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 Kaushalya Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaushalya Infrastructure has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Kaushalya Infrastructure go up and down completely randomly.

Pair Corralation between Chalet Hotels and Kaushalya Infrastructure

Assuming the 90 days trading horizon Chalet Hotels Limited is expected to generate 0.69 times more return on investment than Kaushalya Infrastructure. However, Chalet Hotels Limited is 1.45 times less risky than Kaushalya Infrastructure. It trades about 0.09 of its potential returns per unit of risk. Kaushalya Infrastructure Development is currently generating about 0.04 per unit of risk. If you would invest  56,690  in Chalet Hotels Limited on September 26, 2024 and sell it today you would earn a total of  41,340  from holding Chalet Hotels Limited or generate 72.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.1%
Values	Daily Returns

Chalet Hotels Limited  vs.  Kaushalya Infrastructure Devel

Chalet Hotels Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Chalet Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Kaushalya Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaushalya Infrastructure Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Kaushalya Infrastructure is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chalet Hotels and Kaushalya Infrastructure

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

The idea behind Chalet Hotels Limited and Kaushalya Infrastructure Development 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.