Correlation Between Hindustan Construction and Oriental Hotels

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

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

Diversification Opportunities for Hindustan Construction and Oriental Hotels

0.6

Correlation Coefficient

Hindustan Construction  Oriental Hotels

Poor diversification

The 3 months correlation between Hindustan and Oriental is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Hindustan Construction 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 Hindustan Construction 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 Hindustan Construction i.e., Hindustan Construction and Oriental Hotels go up and down completely randomly.

Pair Corralation between Hindustan Construction and Oriental Hotels

Assuming the 90 days trading horizon Hindustan Construction is expected to under-perform the Oriental Hotels. In addition to that, Hindustan Construction is 1.38 times more volatile than Oriental Hotels Limited. It trades about -0.16 of its total potential returns per unit of risk. Oriental Hotels Limited is currently generating about -0.08 per unit of volatility. If you would invest  18,109  in Oriental Hotels Limited on October 3, 2024 and sell it today you would lose (786.00) from holding Oriental Hotels Limited or give up 4.34% of portfolio value over 90 days.

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

Hindustan Construction  vs.  Oriental Hotels Limited

Hindustan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Oriental Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Hotels Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Oriental 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 Hindustan Construction and Oriental Hotels

The main advantage of trading using opposite Hindustan Construction and Oriental Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Construction 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 Hindustan Construction 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.