Correlation Between India Glycols and EIH Associated

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

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

Diversification Opportunities for India Glycols and EIH Associated

0.53

Correlation Coefficient

India Glycols  EIH Associated

Very weak diversification

The 3 months correlation between India and EIH is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels and India Glycols 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 India Glycols Limited are associated (or correlated) with EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of India Glycols i.e., India Glycols and EIH Associated go up and down completely randomly.

Pair Corralation between India Glycols and EIH Associated

Assuming the 90 days trading horizon India Glycols is expected to generate 2.72 times less return on investment than EIH Associated. But when comparing it to its historical volatility, India Glycols Limited is 3.14 times less risky than EIH Associated. It trades about 0.06 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,977  in EIH Associated Hotels on October 4, 2024 and sell it today you would earn a total of  20,773  from holding EIH Associated Hotels or generate 103.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

India Glycols Limited  vs.  EIH Associated Hotels

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, India Glycols is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

EIH Associated Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, EIH Associated is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with India Glycols and EIH Associated

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

The idea behind India Glycols Limited and EIH Associated Hotels 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.