Correlation Between Hilton Metal and Indian Hotels

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

By analyzing existing cross correlation between Hilton Metal Forging and The Indian Hotels, you can compare the effects of market volatilities on Hilton Metal and Indian 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 Hilton Metal with a short position of Indian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and Indian Hotels.

Diversification Opportunities for Hilton Metal and Indian Hotels

0.71

Correlation Coefficient

Hilton Metal  Indian Hotels

Poor diversification

The 3 months correlation between Hilton and Indian is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels and Hilton Metal 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 Hilton Metal Forging are associated (or correlated) with Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of Hilton Metal i.e., Hilton Metal and Indian Hotels go up and down completely randomly.

Pair Corralation between Hilton Metal and Indian Hotels

Assuming the 90 days trading horizon Hilton Metal is expected to generate 1.12 times less return on investment than Indian Hotels. In addition to that, Hilton Metal is 1.46 times more volatile than The Indian Hotels. It trades about 0.07 of its total potential returns per unit of risk. The Indian Hotels is currently generating about 0.12 per unit of volatility. If you would invest  67,125  in The Indian Hotels on October 26, 2024 and sell it today you would earn a total of  10,400  from holding The Indian Hotels or generate 15.49% return on investment over 90 days.

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

Hilton Metal Forging  vs.  The Indian Hotels

Hilton Metal Forging

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Indian Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Metal and Indian Hotels

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

The idea behind Hilton Metal Forging and The Indian Hotels 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..