Correlation Between Royal Orchid and Advani Hotels

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Can any of the company-specific risk be diversified away by investing in both Royal Orchid 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 Royal Orchid and Advani Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Orchid Hotels and Advani Hotels Resorts, you can compare the effects of market volatilities on Royal Orchid 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 Royal Orchid with a short position of Advani Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Advani Hotels.

Diversification Opportunities for Royal Orchid and Advani Hotels

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Royal and Advani is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels 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 Royal Orchid 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 Royal Orchid Hotels 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 Royal Orchid i.e., Royal Orchid and Advani Hotels go up and down completely randomly.

Pair Corralation between Royal Orchid and Advani Hotels

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 1.51 times more return on investment than Advani Hotels. However, Royal Orchid is 1.51 times more volatile than Advani Hotels Resorts. It trades about -0.05 of its potential returns per unit of risk. Advani Hotels Resorts is currently generating about -0.33 per unit of risk. If you would invest  36,085  in Royal Orchid Hotels on October 12, 2024 and sell it today you would lose (1,420) from holding Royal Orchid Hotels or give up 3.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Royal Orchid Hotels  vs.  Advani Hotels Resorts

 Performance 
       Timeline  
Royal Orchid Hotels 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Royal Orchid is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Advani Hotels Resorts 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Royal Orchid and Advani Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Royal Orchid and Advani Hotels

The main advantage of trading using opposite Royal Orchid and Advani Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Orchid 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 Royal Orchid Hotels 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.
Check out your portfolio center.
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 CEOs Directory module to screen CEOs from public companies around the world.

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