Correlation Between Hindustan Foods and Viceroy Hotels

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

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

Diversification Opportunities for Hindustan Foods and Viceroy Hotels

0.42

Correlation Coefficient

Hindustan Foods  Viceroy Hotels

Very weak diversification

The 3 months correlation between Hindustan and Viceroy is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and Viceroy Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viceroy Hotels and Hindustan Foods 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 Foods Limited are associated (or correlated) with Viceroy Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viceroy Hotels has no effect on the direction of Hindustan Foods i.e., Hindustan Foods and Viceroy Hotels go up and down completely randomly.

Pair Corralation between Hindustan Foods and Viceroy Hotels

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to under-perform the Viceroy Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Hindustan Foods Limited is 1.39 times less risky than Viceroy Hotels. The stock trades about -0.02 of its potential returns per unit of risk. The Viceroy Hotels Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,600  in Viceroy Hotels Limited on September 3, 2024 and sell it today you would earn a total of  1,395  from holding Viceroy Hotels Limited or generate 12.03% return on investment over 90 days.

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

Hindustan Foods Limited  vs.  Viceroy Hotels Limited

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Hindustan Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Viceroy Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viceroy Hotels Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Viceroy Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindustan Foods and Viceroy Hotels

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

The idea behind Hindustan Foods Limited and Viceroy 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 Commodity Directory module to find actively traded commodities issued by global exchanges.