Correlation Between Oriental Hotels and Rashtriya Chemicals

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

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

Diversification Opportunities for Oriental Hotels and Rashtriya Chemicals

0.31

Correlation Coefficient

Oriental Hotels  Rashtriya Chemicals

Weak diversification

The 3 months correlation between Oriental and Rashtriya is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Hotels Limited and Rashtriya Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rashtriya Chemicals and and Oriental 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 Oriental Hotels Limited are associated (or correlated) with Rashtriya Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rashtriya Chemicals and has no effect on the direction of Oriental Hotels i.e., Oriental Hotels and Rashtriya Chemicals go up and down completely randomly.

Pair Corralation between Oriental Hotels and Rashtriya Chemicals

Assuming the 90 days trading horizon Oriental Hotels Limited is expected to under-perform the Rashtriya Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Oriental Hotels Limited is 1.01 times less risky than Rashtriya Chemicals. The stock trades about -0.06 of its potential returns per unit of risk. The Rashtriya Chemicals and is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,082  in Rashtriya Chemicals and on September 25, 2024 and sell it today you would earn a total of  584.00  from holding Rashtriya Chemicals and or generate 3.63% return on investment over 90 days.

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

Oriental Hotels Limited  vs.  Rashtriya Chemicals and

Oriental Hotels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Hotels Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Oriental Hotels is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Rashtriya Chemicals and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rashtriya Chemicals and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental 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 Oriental Hotels and Rashtriya Chemicals

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

The idea behind Oriental Hotels Limited and Rashtriya Chemicals and 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.