Correlation Between General Insurance and Advani Hotels

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

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

Diversification Opportunities for General Insurance and Advani Hotels

0.36

Correlation Coefficient

General Insurance  Advani Hotels

Weak diversification

The 3 months correlation between General and Advani is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Advani Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advani Hotels Resorts and General Insurance 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 General Insurance are associated (or correlated) with Advani Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advani Hotels Resorts has no effect on the direction of General Insurance i.e., General Insurance and Advani Hotels go up and down completely randomly.

Pair Corralation between General Insurance and Advani Hotels

Assuming the 90 days trading horizon General Insurance is expected to generate 2.52 times more return on investment than Advani Hotels. However, General Insurance is 2.52 times more volatile than Advani Hotels Resorts. It trades about 0.13 of its potential returns per unit of risk. Advani Hotels Resorts is currently generating about -0.03 per unit of risk. If you would invest  40,665  in General Insurance on October 4, 2024 and sell it today you would earn a total of  3,760  from holding General Insurance or generate 9.25% return on investment over 90 days.

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

General Insurance  vs.  Advani Hotels Resorts

General Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with General Insurance and Advani Hotels

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

The idea behind General Insurance and Advani Hotels Resorts 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.