Correlation Between Indo Amines and Oriental Hotels

Can any of the company-specific risk be diversified away by investing in both Indo Amines and Oriental Hotels 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 Indo Amines and Oriental Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Indo Amines and Oriental Hotels

-0.09

Correlation Coefficient

Indo Amines  Oriental Hotels

Good diversification

The 3 months correlation between Indo and Oriental is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Indo Amines Limited and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Indo Amines 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 Indo Amines Limited are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of Indo Amines i.e., Indo Amines and Oriental Hotels go up and down completely randomly.

Pair Corralation between Indo Amines and Oriental Hotels

Assuming the 90 days trading horizon Indo Amines is expected to generate 63.59 times less return on investment than Oriental Hotels. In addition to that, Indo Amines is 1.2 times more volatile than Oriental Hotels Limited. It trades about 0.0 of its total potential returns per unit of risk. Oriental Hotels Limited is currently generating about 0.09 per unit of volatility. If you would invest  15,575  in Oriental Hotels Limited on August 31, 2024 and sell it today you would earn a total of  2,533  from holding Oriental Hotels Limited or generate 16.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Indo Amines Limited  vs.  Oriental Hotels Limited

Indo Amines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Amines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Indo Amines is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Oriental Hotels

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Hotels Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Oriental Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Amines and Oriental Hotels

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

The idea behind Indo Amines Limited and Oriental Hotels 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.