Correlation Between Indian Hotels and Fiberweb

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

Diversification Opportunities for Indian Hotels and Fiberweb

0.93

Correlation Coefficient

Indian Hotels  Fiberweb

Almost no diversification

The 3 months correlation between Indian and Fiberweb is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Fiberweb Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberweb 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 Fiberweb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberweb Limited has no effect on the direction of Indian Hotels i.e., Indian Hotels and Fiberweb go up and down completely randomly.

Pair Corralation between Indian Hotels and Fiberweb

Assuming the 90 days trading horizon Indian Hotels is expected to generate 1.11 times less return on investment than Fiberweb. But when comparing it to its historical volatility, The Indian Hotels is 1.97 times less risky than Fiberweb. It trades about 0.11 of its potential returns per unit of risk. Fiberweb Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,373  in Fiberweb Limited on October 15, 2024 and sell it today you would earn a total of  488.00  from holding Fiberweb Limited or generate 11.16% return on investment over 90 days.

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

The Indian Hotels  vs.  Fiberweb Limited

Indian Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 8 (%) 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.

Fiberweb Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberweb Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Fiberweb exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Hotels and Fiberweb

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

The idea behind The Indian Hotels and Fiberweb 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.