Correlation Between Indian Overseas and Juniper Hotels

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Can any of the company-specific risk be diversified away by investing in both Indian Overseas and Juniper 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 Indian Overseas and Juniper Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Overseas Bank and Juniper Hotels, you can compare the effects of market volatilities on Indian Overseas and Juniper 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 Indian Overseas with a short position of Juniper Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Overseas and Juniper Hotels.

Diversification Opportunities for Indian Overseas and Juniper Hotels

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Indian and Juniper is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Indian Overseas Bank and Juniper Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Hotels and Indian Overseas 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 Indian Overseas Bank are associated (or correlated) with Juniper Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juniper Hotels has no effect on the direction of Indian Overseas i.e., Indian Overseas and Juniper Hotels go up and down completely randomly.

Pair Corralation between Indian Overseas and Juniper Hotels

Assuming the 90 days trading horizon Indian Overseas Bank is expected to under-perform the Juniper Hotels. In addition to that, Indian Overseas is 1.1 times more volatile than Juniper Hotels. It trades about -0.06 of its total potential returns per unit of risk. Juniper Hotels is currently generating about -0.03 per unit of volatility. If you would invest  36,505  in Juniper Hotels on September 29, 2024 and sell it today you would lose (1,980) from holding Juniper Hotels or give up 5.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Indian Overseas Bank  vs.  Juniper Hotels

 Performance 
       Timeline  
Indian Overseas Bank 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Juniper Hotels 

Risk-Adjusted Performance

0 of 100

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

Indian Overseas and Juniper Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Indian Overseas and Juniper Hotels

The main advantage of trading using opposite Indian Overseas and Juniper Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Overseas position performs unexpectedly, Juniper 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 Juniper Hotels will offset losses from the drop in Juniper Hotels' long position.
The idea behind Indian Overseas Bank and Juniper 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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