Correlation Between EIH Associated and Gillette India

Can any of the company-specific risk be diversified away by investing in both EIH Associated and Gillette India 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 EIH Associated and Gillette India into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for EIH Associated and Gillette India

0.47

Correlation Coefficient

EIH Associated  Gillette India

Very weak diversification

The 3 months correlation between EIH and Gillette is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding EIH Associated Hotels and Gillette India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gillette India and EIH Associated 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 EIH Associated Hotels are associated (or correlated) with Gillette India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gillette India has no effect on the direction of EIH Associated i.e., EIH Associated and Gillette India go up and down completely randomly.

Pair Corralation between EIH Associated and Gillette India

Assuming the 90 days trading horizon EIH Associated Hotels is expected to generate 4.54 times more return on investment than Gillette India. However, EIH Associated is 4.54 times more volatile than Gillette India Limited. It trades about 0.05 of its potential returns per unit of risk. Gillette India Limited is currently generating about 0.11 per unit of risk. If you would invest  23,884  in EIH Associated Hotels on October 24, 2024 and sell it today you would earn a total of  13,966  from holding EIH Associated Hotels or generate 58.47% return on investment over 90 days.

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

EIH Associated Hotels  vs.  Gillette India Limited

EIH Associated Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, EIH Associated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gillette India

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gillette India unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EIH Associated and Gillette India

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

The idea behind EIH Associated Hotels and Gillette India 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.