Correlation Between Tangerine Beach and Renuka City

Can any of the company-specific risk be diversified away by investing in both Tangerine Beach and Renuka City 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 Tangerine Beach and Renuka City into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tangerine Beach Hotels and Renuka City Hotel, you can compare the effects of market volatilities on Tangerine Beach and Renuka City 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 Tangerine Beach with a short position of Renuka City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tangerine Beach and Renuka City.

Diversification Opportunities for Tangerine Beach and Renuka City

0.75

Correlation Coefficient

Tangerine Beach  Renuka City

Poor diversification

The 3 months correlation between Tangerine and Renuka is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tangerine Beach Hotels and Renuka City Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renuka City Hotel and Tangerine Beach 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 Tangerine Beach Hotels are associated (or correlated) with Renuka City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renuka City Hotel has no effect on the direction of Tangerine Beach i.e., Tangerine Beach and Renuka City go up and down completely randomly.

Pair Corralation between Tangerine Beach and Renuka City

Assuming the 90 days trading horizon Tangerine Beach Hotels is expected to generate 2.85 times more return on investment than Renuka City. However, Tangerine Beach is 2.85 times more volatile than Renuka City Hotel. It trades about 0.24 of its potential returns per unit of risk. Renuka City Hotel is currently generating about 0.21 per unit of risk. If you would invest  6,200  in Tangerine Beach Hotels on September 17, 2024 and sell it today you would earn a total of  1,100  from holding Tangerine Beach Hotels or generate 17.74% return on investment over 90 days.

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

Tangerine Beach Hotels  vs.  Renuka City Hotel

Tangerine Beach Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Beach Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tangerine Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Renuka City Hotel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renuka City Hotel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renuka City sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tangerine Beach and Renuka City

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

The idea behind Tangerine Beach Hotels and Renuka City Hotel 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.