Correlation Between Unitech and Asian Hotels

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

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

Diversification Opportunities for Unitech and Asian Hotels

0.14

Correlation Coefficient

Unitech  Asian Hotels

Average diversification

The 3 months correlation between Unitech and Asian is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Unitech Limited and Asian Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels Limited and Unitech 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 Unitech Limited are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels Limited has no effect on the direction of Unitech i.e., Unitech and Asian Hotels go up and down completely randomly.

Pair Corralation between Unitech and Asian Hotels

Assuming the 90 days trading horizon Unitech is expected to generate 5.31 times less return on investment than Asian Hotels. In addition to that, Unitech is 1.07 times more volatile than Asian Hotels Limited. It trades about 0.02 of its total potential returns per unit of risk. Asian Hotels Limited is currently generating about 0.11 per unit of volatility. If you would invest  18,332  in Asian Hotels Limited on September 4, 2024 and sell it today you would earn a total of  3,722  from holding Asian Hotels Limited or generate 20.3% return on investment over 90 days.

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

Unitech Limited  vs.  Asian Hotels Limited

Unitech Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unitech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Unitech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Asian Hotels Limited

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unitech and Asian Hotels

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

The idea behind Unitech Limited and Asian 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.