Correlation Between Cholamandalam Financial and Samhi Hotels

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

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

Diversification Opportunities for Cholamandalam Financial and Samhi Hotels

0.48

Correlation Coefficient

Cholamandalam Financial  Samhi Hotels

Very weak diversification

The 3 months correlation between Cholamandalam and Samhi is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and Samhi Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhi Hotels Limited and Cholamandalam Financial 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 Cholamandalam Financial Holdings are associated (or correlated) with Samhi Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhi Hotels Limited has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Samhi Hotels go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Samhi Hotels

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to generate 1.29 times more return on investment than Samhi Hotels. However, Cholamandalam Financial is 1.29 times more volatile than Samhi Hotels Limited. It trades about -0.05 of its potential returns per unit of risk. Samhi Hotels Limited is currently generating about -0.13 per unit of risk. If you would invest  172,500  in Cholamandalam Financial Holdings on September 4, 2024 and sell it today you would lose (15,875) from holding Cholamandalam Financial Holdings or give up 9.2% of portfolio value over 90 days.

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

Cholamandalam Financial Holdin  vs.  Samhi Hotels Limited

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Samhi Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhi Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cholamandalam Financial and Samhi Hotels

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

The idea behind Cholamandalam Financial Holdings and Samhi Hotels Limited 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.