Correlation Between Deepak Nitrite and Chalet Hotels

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

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

Diversification Opportunities for Deepak Nitrite and Chalet Hotels

0.12

Correlation Coefficient

Deepak Nitrite  Chalet Hotels

Average diversification

The 3 months correlation between Deepak and Chalet is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Deepak Nitrite Limited and Chalet Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalet Hotels Limited and Deepak Nitrite 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 Deepak Nitrite Limited are associated (or correlated) with Chalet Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalet Hotels Limited has no effect on the direction of Deepak Nitrite i.e., Deepak Nitrite and Chalet Hotels go up and down completely randomly.

Pair Corralation between Deepak Nitrite and Chalet Hotels

Assuming the 90 days trading horizon Deepak Nitrite Limited is expected to under-perform the Chalet Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Deepak Nitrite Limited is 1.07 times less risky than Chalet Hotels. The stock trades about -0.05 of its potential returns per unit of risk. The Chalet Hotels Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  88,165  in Chalet Hotels Limited on September 16, 2024 and sell it today you would earn a total of  12,590  from holding Chalet Hotels Limited or generate 14.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Deepak Nitrite Limited  vs.  Chalet Hotels Limited

Deepak Nitrite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deepak Nitrite Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Chalet Hotels Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Chalet Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deepak Nitrite and Chalet Hotels

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

The idea behind Deepak Nitrite Limited and Chalet 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.