Correlation Between Diligent Media and Kamat Hotels

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

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

Diversification Opportunities for Diligent Media and Kamat Hotels

0.28

Correlation Coefficient

Diligent Media  Kamat Hotels

Modest diversification

The 3 months correlation between Diligent and Kamat is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and Kamat Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamat Hotels Limited and Diligent Media 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 Diligent Media are associated (or correlated) with Kamat Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamat Hotels Limited has no effect on the direction of Diligent Media i.e., Diligent Media and Kamat Hotels go up and down completely randomly.

Pair Corralation between Diligent Media and Kamat Hotels

Assuming the 90 days trading horizon Diligent Media is expected to generate 12.6 times less return on investment than Kamat Hotels. In addition to that, Diligent Media is 1.04 times more volatile than Kamat Hotels Limited. It trades about 0.01 of its total potential returns per unit of risk. Kamat Hotels Limited is currently generating about 0.08 per unit of volatility. If you would invest  21,201  in Kamat Hotels Limited on September 13, 2024 and sell it today you would earn a total of  3,174  from holding Kamat Hotels Limited or generate 14.97% return on investment over 90 days.

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

Diligent Media  vs.  Kamat Hotels Limited

Diligent Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diligent Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Diligent Media is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Kamat Hotels Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kamat Hotels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Kamat Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diligent Media and Kamat Hotels

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

The idea behind Diligent Media and Kamat 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.