Correlation Between Indian Hotels and Iris Clothings

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

Diversification Opportunities for Indian Hotels and Iris Clothings

-0.48

Correlation Coefficient

Indian Hotels  Iris Clothings

Very good diversification

The 3 months correlation between Indian and Iris is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Iris Clothings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Clothings 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 Iris Clothings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Clothings has no effect on the direction of Indian Hotels i.e., Indian Hotels and Iris Clothings go up and down completely randomly.

Pair Corralation between Indian Hotels and Iris Clothings

Assuming the 90 days trading horizon The Indian Hotels is expected to generate 0.73 times more return on investment than Iris Clothings. However, The Indian Hotels is 1.37 times less risky than Iris Clothings. It trades about 0.32 of its potential returns per unit of risk. Iris Clothings Limited is currently generating about -0.01 per unit of risk. If you would invest  78,680  in The Indian Hotels on September 22, 2024 and sell it today you would earn a total of  6,730  from holding The Indian Hotels or generate 8.55% return on investment over 90 days.

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

The Indian Hotels  vs.  Iris Clothings 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 weak basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Clothings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Indian Hotels and Iris Clothings

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

The idea behind The Indian Hotels and Iris Clothings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..