Correlation Between Advani Hotels and NMDC

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

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

Diversification Opportunities for Advani Hotels and NMDC

-0.22

Correlation Coefficient

Advani Hotels  NMDC

Very good diversification

The 3 months correlation between Advani and NMDC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Advani Hotels Resorts and NMDC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Limited and Advani Hotels 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 Advani Hotels Resorts are associated (or correlated) with NMDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Limited has no effect on the direction of Advani Hotels i.e., Advani Hotels and NMDC go up and down completely randomly.

Pair Corralation between Advani Hotels and NMDC

Assuming the 90 days trading horizon Advani Hotels Resorts is expected to under-perform the NMDC. In addition to that, Advani Hotels is 1.03 times more volatile than NMDC Limited. It trades about -0.05 of its total potential returns per unit of risk. NMDC Limited is currently generating about 0.11 per unit of volatility. If you would invest  21,400  in NMDC Limited on September 12, 2024 and sell it today you would earn a total of  2,997  from holding NMDC Limited or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Advani Hotels Resorts  vs.  NMDC Limited

Advani Hotels Resorts

Risk-Adjusted Performance

0 of 100

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 unfluctuating 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.

NMDC Limited

Risk-Adjusted Performance

8 of 100

Good

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

Pair Trading with Advani Hotels and NMDC

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

The idea behind Advani Hotels Resorts and NMDC 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 Stocks Directory module to find actively traded stocks across global markets.