Correlation Between Indian Hotels and Bosch

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

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

Diversification Opportunities for Indian Hotels and Bosch

-0.21

Correlation Coefficient

Indian Hotels  Bosch

Very good diversification

The 3 months correlation between Indian and Bosch is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Bosch Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosch Limited and Indian Hotels 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 The Indian Hotels are associated (or correlated) with Bosch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosch Limited has no effect on the direction of Indian Hotels i.e., Indian Hotels and Bosch go up and down completely randomly.

Pair Corralation between Indian Hotels and Bosch

Assuming the 90 days trading horizon The Indian Hotels is expected to generate 1.22 times more return on investment than Bosch. However, Indian Hotels is 1.22 times more volatile than Bosch Limited. It trades about 0.68 of its potential returns per unit of risk. Bosch Limited is currently generating about 0.27 per unit of risk. If you would invest  73,720  in The Indian Hotels on September 19, 2024 and sell it today you would earn a total of  14,285  from holding The Indian Hotels or generate 19.38% return on investment over 90 days.

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

The Indian Hotels  vs.  Bosch Limited

Indian Hotels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bosch Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bosch Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Bosch is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indian Hotels and Bosch

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

The idea behind The Indian Hotels and Bosch 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.