Correlation Between Zuari Agro and EIH Associated

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

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

Diversification Opportunities for Zuari Agro and EIH Associated

0.66

Correlation Coefficient

Zuari Agro  EIH Associated

Poor diversification

The 3 months correlation between Zuari and EIH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Zuari Agro Chemicals and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels and Zuari Agro 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 Zuari Agro Chemicals are associated (or correlated) with EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Zuari Agro i.e., Zuari Agro and EIH Associated go up and down completely randomly.

Pair Corralation between Zuari Agro and EIH Associated

Assuming the 90 days trading horizon Zuari Agro is expected to generate 4.23 times less return on investment than EIH Associated. In addition to that, Zuari Agro is 2.81 times more volatile than EIH Associated Hotels. It trades about 0.04 of its total potential returns per unit of risk. EIH Associated Hotels is currently generating about 0.45 per unit of volatility. If you would invest  38,360  in EIH Associated Hotels on September 23, 2024 and sell it today you would earn a total of  3,715  from holding EIH Associated Hotels or generate 9.68% return on investment over 90 days.

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

Zuari Agro Chemicals  vs.  EIH Associated Hotels

Zuari Agro Chemicals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Zuari Agro displayed solid returns over the last few months and may actually be approaching a breakup point.

EIH Associated Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, EIH Associated is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zuari Agro and EIH Associated

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

The idea behind Zuari Agro Chemicals and EIH Associated Hotels 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.