Correlation Between Royal Orchid and Maharashtra Scooters

Can any of the company-specific risk be diversified away by investing in both Royal Orchid and Maharashtra Scooters 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 Maharashtra Scooters 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 Maharashtra Scooters Limited, you can compare the effects of market volatilities on Royal Orchid and Maharashtra Scooters 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 Maharashtra Scooters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Maharashtra Scooters.

Diversification Opportunities for Royal Orchid and Maharashtra Scooters

0.0

Correlation Coefficient

Royal Orchid  Maharashtra Scooters

Pay attention - limited upside

The 3 months correlation between Royal and Maharashtra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters 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 Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Royal Orchid i.e., Royal Orchid and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Royal Orchid and Maharashtra Scooters

If you would invest  32,830  in Royal Orchid Hotels on October 21, 2024 and sell it today you would earn a total of  3,010  from holding Royal Orchid Hotels or generate 9.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Royal Orchid Hotels  vs.  Maharashtra Scooters Limited

Royal Orchid Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Royal Orchid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maharashtra Scooters is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Royal Orchid and Maharashtra Scooters

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

The idea behind Royal Orchid Hotels and Maharashtra Scooters 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.