Correlation Between Indo Borax and Kamat Hotels

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

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

Diversification Opportunities for Indo Borax and Kamat Hotels

0.07

Correlation Coefficient

Indo Borax  Kamat Hotels

Significant diversification

The 3 months correlation between Indo and Kamat is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and Kamat Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamat Hotels Limited and Indo Borax 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 Borax Chemicals are associated (or correlated) with Kamat Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamat Hotels Limited has no effect on the direction of Indo Borax i.e., Indo Borax and Kamat Hotels go up and down completely randomly.

Pair Corralation between Indo Borax and Kamat Hotels

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to under-perform the Kamat Hotels. In addition to that, Indo Borax is 1.11 times more volatile than Kamat Hotels Limited. It trades about -0.02 of its total potential returns per unit of risk. Kamat Hotels Limited is currently generating about 0.09 per unit of volatility. If you would invest  20,901  in Kamat Hotels Limited on September 12, 2024 and sell it today you would earn a total of  3,345  from holding Kamat Hotels Limited or generate 16.0% return on investment over 90 days.

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

Indo Borax Chemicals  vs.  Kamat Hotels Limited

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Kamat Hotels Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kamat Hotels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Kamat Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indo Borax and Kamat Hotels

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

The idea behind Indo Borax Chemicals and Kamat 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.