Correlation Between Oil Natural and Chalet Hotels

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

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

Diversification Opportunities for Oil Natural and Chalet Hotels

0.22

Correlation Coefficient

Oil Natural  Chalet Hotels

Modest diversification

The 3 months correlation between Oil and Chalet is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas 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 Oil Natural 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 Oil Natural Gas 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 Oil Natural i.e., Oil Natural and Chalet Hotels go up and down completely randomly.

Pair Corralation between Oil Natural and Chalet Hotels

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.85 times more return on investment than Chalet Hotels. However, Oil Natural Gas is 1.17 times less risky than Chalet Hotels. It trades about 0.07 of its potential returns per unit of risk. Chalet Hotels Limited is currently generating about -0.11 per unit of risk. If you would invest  22,811  in Oil Natural Gas on December 30, 2024 and sell it today you would earn a total of  1,827  from holding Oil Natural Gas or generate 8.01% return on investment over 90 days.

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

Oil Natural Gas  vs.  Chalet Hotels Limited

Oil Natural Gas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Oil Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chalet Hotels Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chalet Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Oil Natural and Chalet Hotels

The main advantage of trading using opposite Oil Natural and Chalet Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural 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 Oil Natural Gas 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.