Correlation Between Indian Oil and Chalet Hotels

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

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

Diversification Opportunities for Indian Oil and Chalet Hotels

-0.29

Correlation Coefficient

Indian Oil  Chalet Hotels

Very good diversification

The 3 months correlation between Indian and Chalet is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Chalet Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalet Hotels Limited and Indian Oil 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 Oil are associated (or correlated) with Chalet Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalet Hotels Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Chalet Hotels go up and down completely randomly.

Pair Corralation between Indian Oil and Chalet Hotels

Assuming the 90 days trading horizon Indian Oil is expected to generate 1.1 times more return on investment than Chalet Hotels. However, Indian Oil is 1.1 times more volatile than Chalet Hotels Limited. It trades about 0.09 of its potential returns per unit of risk. Chalet Hotels Limited is currently generating about 0.09 per unit of risk. If you would invest  8,183  in Indian Oil on October 5, 2024 and sell it today you would earn a total of  5,631  from holding Indian Oil or generate 68.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.67%
Values	Daily Returns

Indian Oil  vs.  Chalet Hotels Limited

Indian Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chalet Hotels Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Chalet Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Chalet Hotels

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

The idea behind Indian Oil and Chalet 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.