Correlation Between Kamat Hotels and Privi Speciality

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

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

Diversification Opportunities for Kamat Hotels and Privi Speciality

-0.71

Correlation Coefficient

Kamat Hotels  Privi Speciality

Pay attention - limited upside

The 3 months correlation between Kamat and Privi is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kamat Hotels Limited and Privi Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Privi Speciality Che and Kamat Hotels 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 Kamat Hotels Limited are associated (or correlated) with Privi Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Privi Speciality Che has no effect on the direction of Kamat Hotels i.e., Kamat Hotels and Privi Speciality go up and down completely randomly.

Pair Corralation between Kamat Hotels and Privi Speciality

Assuming the 90 days trading horizon Kamat Hotels Limited is expected to generate 2.06 times more return on investment than Privi Speciality. However, Kamat Hotels is 2.06 times more volatile than Privi Speciality Chemicals. It trades about 0.11 of its potential returns per unit of risk. Privi Speciality Chemicals is currently generating about -0.05 per unit of risk. If you would invest  23,507  in Kamat Hotels Limited on December 27, 2024 and sell it today you would earn a total of  6,958  from holding Kamat Hotels Limited or generate 29.6% return on investment over 90 days.

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

Kamat Hotels Limited  vs.  Privi Speciality Chemicals

Kamat Hotels Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamat Hotels Limited are ranked lower than 8 (%) 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.

Privi Speciality Che

Risk-Adjusted Performance

Very Weak

Over the last 90 days Privi Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kamat Hotels and Privi Speciality

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

The idea behind Kamat Hotels Limited and Privi Speciality Chemicals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.