Correlation Between Future Retail and Asian Hotels

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

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

Diversification Opportunities for Future Retail and Asian Hotels

0.0

Correlation Coefficient

Future Retail  Asian Hotels

Pay attention - limited upside

The 3 months correlation between Future and Asian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Future Retail Limited and Asian Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels Limited and Future Retail 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 Future Retail Limited are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels Limited has no effect on the direction of Future Retail i.e., Future Retail and Asian Hotels go up and down completely randomly.

Pair Corralation between Future Retail and Asian Hotels

Assuming the 90 days trading horizon Future Retail Limited is expected to under-perform the Asian Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Future Retail Limited is 1.22 times less risky than Asian Hotels. The stock trades about -0.04 of its potential returns per unit of risk. The Asian Hotels Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,805  in Asian Hotels Limited on October 3, 2024 and sell it today you would earn a total of  24,245  from holding Asian Hotels Limited or generate 310.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	89.53%
Values	Daily Returns

Future Retail Limited  vs.  Asian Hotels Limited

Future Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Asian Hotels Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Retail and Asian Hotels

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

The idea behind Future Retail Limited and Asian 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.