Correlation Between Eros International and Byke Hospitality

Can any of the company-specific risk be diversified away by investing in both Eros International and Byke Hospitality 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 Eros International and Byke Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eros International Media and The Byke Hospitality, you can compare the effects of market volatilities on Eros International and Byke Hospitality 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 Eros International with a short position of Byke Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eros International and Byke Hospitality.

Diversification Opportunities for Eros International and Byke Hospitality

-0.54

Correlation Coefficient

Eros International  Byke Hospitality

Excellent diversification

The 3 months correlation between Eros and Byke is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and The Byke Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byke Hospitality and Eros International 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 Eros International Media are associated (or correlated) with Byke Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byke Hospitality has no effect on the direction of Eros International i.e., Eros International and Byke Hospitality go up and down completely randomly.

Pair Corralation between Eros International and Byke Hospitality

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Byke Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Eros International Media is 1.28 times less risky than Byke Hospitality. The stock trades about -0.28 of its potential returns per unit of risk. The The Byke Hospitality is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,689  in The Byke Hospitality on October 8, 2024 and sell it today you would earn a total of  3,185  from holding The Byke Hospitality or generate 47.62% return on investment over 90 days.

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

Eros International Media  vs.  The Byke Hospitality

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Byke Hospitality

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Byke Hospitality are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Byke Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eros International and Byke Hospitality

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

The idea behind Eros International Media and The Byke Hospitality 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.