Correlation Between Fortis Healthcare and Oriental Hotels

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

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

Diversification Opportunities for Fortis Healthcare and Oriental Hotels

0.54

Correlation Coefficient

Fortis Healthcare  Oriental Hotels

Very weak diversification

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

Pair Corralation between Fortis Healthcare and Oriental Hotels

Assuming the 90 days trading horizon Fortis Healthcare Limited is expected to generate 0.69 times more return on investment than Oriental Hotels. However, Fortis Healthcare Limited is 1.45 times less risky than Oriental Hotels. It trades about 0.15 of its potential returns per unit of risk. Oriental Hotels Limited is currently generating about 0.0 per unit of risk. If you would invest  59,770  in Fortis Healthcare Limited on October 12, 2024 and sell it today you would earn a total of  11,555  from holding Fortis Healthcare Limited or generate 19.33% return on investment over 90 days.

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

Fortis Healthcare Limited  vs.  Oriental Hotels Limited

Fortis Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Oriental Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fortis Healthcare and Oriental Hotels

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

The idea behind Fortis Healthcare Limited and Oriental 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.