Correlation Between Indian Hotels and Capacite Infraprojects

Can any of the company-specific risk be diversified away by investing in both Indian Hotels and Capacite Infraprojects 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 Capacite Infraprojects 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 Capacite Infraprojects Limited, you can compare the effects of market volatilities on Indian Hotels and Capacite Infraprojects 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 Capacite Infraprojects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Hotels and Capacite Infraprojects.

Diversification Opportunities for Indian Hotels and Capacite Infraprojects

0.78

Correlation Coefficient

Indian Hotels  Capacite Infraprojects

Poor diversification

The 3 months correlation between Indian and Capacite is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Capacite Infraprojects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capacite Infraprojects 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 Capacite Infraprojects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capacite Infraprojects has no effect on the direction of Indian Hotels i.e., Indian Hotels and Capacite Infraprojects go up and down completely randomly.

Pair Corralation between Indian Hotels and Capacite Infraprojects

Assuming the 90 days trading horizon The Indian Hotels is expected to generate 0.67 times more return on investment than Capacite Infraprojects. However, The Indian Hotels is 1.5 times less risky than Capacite Infraprojects. It trades about 0.15 of its potential returns per unit of risk. Capacite Infraprojects Limited is currently generating about 0.08 per unit of risk. If you would invest  42,148  in The Indian Hotels on September 23, 2024 and sell it today you would earn a total of  43,262  from holding The Indian Hotels or generate 102.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

The Indian Hotels  vs.  Capacite Infraprojects Limited

Indian Hotels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capacite Infraprojects

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Capacite Infraprojects unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Hotels and Capacite Infraprojects

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

The idea behind The Indian Hotels and Capacite Infraprojects 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.