Correlation Between NH HOTEL and Indus Gas

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

By analyzing existing cross correlation between NH HOTEL GROUP and Indus Gas, you can compare the effects of market volatilities on NH HOTEL and Indus Gas 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 NH HOTEL with a short position of Indus Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Indus Gas.

Diversification Opportunities for NH HOTEL and Indus Gas

-0.52

Correlation Coefficient

NH HOTEL  Indus Gas

Excellent diversification

The 3 months correlation between NH5 and Indus is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP and Indus Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indus Gas and NH HOTEL 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 NH HOTEL GROUP are associated (or correlated) with Indus Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indus Gas has no effect on the direction of NH HOTEL i.e., NH HOTEL and Indus Gas go up and down completely randomly.

Pair Corralation between NH HOTEL and Indus Gas

Assuming the 90 days trading horizon NH HOTEL is expected to generate 205.89 times less return on investment than Indus Gas. But when comparing it to its historical volatility, NH HOTEL GROUP is 62.63 times less risky than Indus Gas. It trades about 0.07 of its potential returns per unit of risk. Indus Gas is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Indus Gas on September 13, 2024 and sell it today you would lose (7.00) from holding Indus Gas or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

NH HOTEL GROUP  vs.  Indus Gas

NH HOTEL GROUP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NH HOTEL GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NH HOTEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Indus Gas

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Indus Gas are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Indus Gas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NH HOTEL and Indus Gas

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

The idea behind NH HOTEL GROUP and Indus Gas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.