Correlation Between Kavveri Telecom and Oriental Hotels

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

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

Diversification Opportunities for Kavveri Telecom and Oriental Hotels

-0.3

Correlation Coefficient

Kavveri Telecom  Oriental Hotels

Very good diversification

The 3 months correlation between Kavveri and Oriental is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kavveri Telecom Products and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Kavveri Telecom 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 Kavveri Telecom Products are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of Kavveri Telecom i.e., Kavveri Telecom and Oriental Hotels go up and down completely randomly.

Pair Corralation between Kavveri Telecom and Oriental Hotels

Assuming the 90 days trading horizon Kavveri Telecom Products is expected to generate 1.15 times more return on investment than Oriental Hotels. However, Kavveri Telecom is 1.15 times more volatile than Oriental Hotels Limited. It trades about 0.16 of its potential returns per unit of risk. Oriental Hotels Limited is currently generating about 0.08 per unit of risk. If you would invest  660.00  in Kavveri Telecom Products on October 11, 2024 and sell it today you would earn a total of  5,298  from holding Kavveri Telecom Products or generate 802.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Kavveri Telecom Products  vs.  Oriental Hotels Limited

Kavveri Telecom Products

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kavveri Telecom Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Kavveri Telecom demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Oriental Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Oriental Hotels is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Kavveri Telecom and Oriental Hotels

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

The idea behind Kavveri Telecom Products and Oriental 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.