Correlation Between Chalet Hotels and Nippon Life

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

Diversification Opportunities for Chalet Hotels and Nippon Life

0.88

Correlation Coefficient

Chalet Hotels  Nippon Life

Very poor diversification

The 3 months correlation between Chalet and Nippon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Nippon Life India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Life India 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 Nippon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Life India has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Nippon Life go up and down completely randomly.

Pair Corralation between Chalet Hotels and Nippon Life

Assuming the 90 days trading horizon Chalet Hotels Limited is expected to generate 0.79 times more return on investment than Nippon Life. However, Chalet Hotels Limited is 1.27 times less risky than Nippon Life. It trades about -0.1 of its potential returns per unit of risk. Nippon Life India is currently generating about -0.1 per unit of risk. If you would invest  98,910  in Chalet Hotels Limited on December 27, 2024 and sell it today you would lose (14,410) from holding Chalet Hotels Limited or give up 14.57% 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.  Nippon Life India

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 unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nippon Life India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nippon Life India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Chalet Hotels and Nippon Life

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

The idea behind Chalet Hotels Limited and Nippon Life India 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.