Correlation Between KIOCL and Advani Hotels

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

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

Diversification Opportunities for KIOCL and Advani Hotels

0.24

Correlation Coefficient

KIOCL  Advani Hotels

Modest diversification

The 3 months correlation between KIOCL and Advani is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and Advani Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advani Hotels Resorts and KIOCL 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 KIOCL Limited are associated (or correlated) with Advani Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advani Hotels Resorts has no effect on the direction of KIOCL i.e., KIOCL and Advani Hotels go up and down completely randomly.

Pair Corralation between KIOCL and Advani Hotels

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 1.89 times more return on investment than Advani Hotels. However, KIOCL is 1.89 times more volatile than Advani Hotels Resorts. It trades about 0.01 of its potential returns per unit of risk. Advani Hotels Resorts is currently generating about -0.07 per unit of risk. If you would invest  37,700  in KIOCL Limited on October 23, 2024 and sell it today you would lose (670.00) from holding KIOCL Limited or give up 1.78% of portfolio value over 90 days.

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

KIOCL Limited  vs.  Advani Hotels Resorts

KIOCL Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KIOCL and Advani Hotels

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

The idea behind KIOCL Limited and Advani Hotels Resorts 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.