Correlation Between Dalata Hotel and Automatic Data

Can any of the company-specific risk be diversified away by investing in both Dalata Hotel and Automatic Data 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 Dalata Hotel and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dalata Hotel Group and Automatic Data Processing, you can compare the effects of market volatilities on Dalata Hotel and Automatic Data 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 Dalata Hotel with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalata Hotel and Automatic Data.

Diversification Opportunities for Dalata Hotel and Automatic Data

0.38

Correlation Coefficient

Dalata Hotel  Automatic Data

Weak diversification

The 3 months correlation between Dalata and Automatic is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and Dalata Hotel 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 Dalata Hotel Group are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Dalata Hotel i.e., Dalata Hotel and Automatic Data go up and down completely randomly.

Pair Corralation between Dalata Hotel and Automatic Data

Assuming the 90 days trading horizon Dalata Hotel Group is expected to generate 1.7 times more return on investment than Automatic Data. However, Dalata Hotel is 1.7 times more volatile than Automatic Data Processing. It trades about 0.15 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.06 per unit of risk. If you would invest  34,000  in Dalata Hotel Group on October 25, 2024 and sell it today you would earn a total of  5,500  from holding Dalata Hotel Group or generate 16.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Dalata Hotel Group  vs.  Automatic Data Processing

Dalata Hotel Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Dalata Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Automatic Data is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dalata Hotel and Automatic Data

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

The idea behind Dalata Hotel Group and Automatic Data Processing 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.