Correlation Between Indian Hotels and Mcleod Russel

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

Diversification Opportunities for Indian Hotels and Mcleod Russel

0.86

Correlation Coefficient

Indian Hotels  Mcleod Russel

Very poor diversification

The 3 months correlation between Indian and Mcleod is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Mcleod Russel India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mcleod Russel India 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 Mcleod Russel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mcleod Russel India has no effect on the direction of Indian Hotels i.e., Indian Hotels and Mcleod Russel go up and down completely randomly.

Pair Corralation between Indian Hotels and Mcleod Russel

Assuming the 90 days trading horizon The Indian Hotels is expected to generate 0.36 times more return on investment than Mcleod Russel. However, The Indian Hotels is 2.76 times less risky than Mcleod Russel. It trades about 0.06 of its potential returns per unit of risk. Mcleod Russel India is currently generating about -0.09 per unit of risk. If you would invest  83,720  in The Indian Hotels on October 10, 2024 and sell it today you would earn a total of  1,495  from holding The Indian Hotels or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

The Indian Hotels  vs.  Mcleod Russel India

Indian Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mcleod Russel India

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mcleod Russel India are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Mcleod Russel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Hotels and Mcleod Russel

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

The idea behind The Indian Hotels and Mcleod Russel India 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.