Correlation Between Dalata Hotel and BP Plc

Can any of the company-specific risk be diversified away by investing in both Dalata Hotel and BP Plc 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 BP Plc 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 BP plc, you can compare the effects of market volatilities on Dalata Hotel and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalata Hotel and BP Plc.

Diversification Opportunities for Dalata Hotel and BP Plc

0.19

Correlation Coefficient

Dalata Hotel  BP Plc

Average diversification

The 3 months correlation between Dalata and BPE5 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Dalata Hotel i.e., Dalata Hotel and BP Plc go up and down completely randomly.

Pair Corralation between Dalata Hotel and BP Plc

Assuming the 90 days horizon Dalata Hotel Group is expected to generate 1.57 times more return on investment than BP Plc. However, Dalata Hotel is 1.57 times more volatile than BP plc. It trades about 0.15 of its potential returns per unit of risk. BP plc is currently generating about 0.14 per unit of risk. If you would invest  458.00  in Dalata Hotel Group on December 20, 2024 and sell it today you would earn a total of  110.00  from holding Dalata Hotel Group or generate 24.02% return on investment over 90 days.

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

Dalata Hotel Group  vs.  BP plc

Dalata Hotel Group

Risk-Adjusted Performance

OK

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. Despite nearly uncertain basic indicators, Dalata Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

BP plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, BP Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalata Hotel and BP Plc

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

The idea behind Dalata Hotel Group and BP plc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.