Correlation Between HMT and Advani Hotels

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

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

Diversification Opportunities for HMT and Advani Hotels

0.37

Correlation Coefficient

HMT  Advani Hotels

Weak diversification

The 3 months correlation between HMT and Advani is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited 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 HMT 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 HMT Limited 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 HMT i.e., HMT and Advani Hotels go up and down completely randomly.

Pair Corralation between HMT and Advani Hotels

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the Advani Hotels. In addition to that, HMT is 1.12 times more volatile than Advani Hotels Resorts. It trades about -0.03 of its total potential returns per unit of risk. Advani Hotels Resorts is currently generating about 0.01 per unit of volatility. If you would invest  7,052  in Advani Hotels Resorts on October 8, 2024 and sell it today you would lose (20.00) from holding Advani Hotels Resorts or give up 0.28% of portfolio value over 90 days.

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

HMT Limited  vs.  Advani Hotels Resorts

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with HMT and Advani Hotels

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

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.