Correlation Between JSW Holdings and Chalet Hotels

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

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

Diversification Opportunities for JSW Holdings and Chalet Hotels

0.26

Correlation Coefficient

JSW Holdings  Chalet Hotels

Modest diversification

The 3 months correlation between JSW and Chalet is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited 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 JSW Holdings 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 JSW Holdings Limited 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 JSW Holdings i.e., JSW Holdings and Chalet Hotels go up and down completely randomly.

Pair Corralation between JSW Holdings and Chalet Hotels

Assuming the 90 days trading horizon JSW Holdings is expected to generate 1.46 times less return on investment than Chalet Hotels. But when comparing it to its historical volatility, JSW Holdings Limited is 1.04 times less risky than Chalet Hotels. It trades about 0.13 of its potential returns per unit of risk. Chalet Hotels Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  88,990  in Chalet Hotels Limited on October 4, 2024 and sell it today you would earn a total of  8,430  from holding Chalet Hotels Limited or generate 9.47% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Chalet Hotels Limited

JSW Holdings Limited

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Chalet Hotels Limited

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with JSW Holdings and Chalet Hotels

The main advantage of trading using opposite JSW Holdings and Chalet Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSW Holdings 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 JSW Holdings Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.