Correlation Between Chalet Hotels and Music Broadcast

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

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

Diversification Opportunities for Chalet Hotels and Music Broadcast

-0.07

Correlation Coefficient

Chalet Hotels  Music Broadcast

Good diversification

The 3 months correlation between Chalet and Music is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Chalet Hotels Limited and Music Broadcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Music Broadcast and Chalet 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 Chalet Hotels Limited are associated (or correlated) with Music Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Music Broadcast has no effect on the direction of Chalet Hotels i.e., Chalet Hotels and Music Broadcast go up and down completely randomly.

Pair Corralation between Chalet Hotels and Music Broadcast

Assuming the 90 days trading horizon Chalet Hotels Limited is expected to generate 1.21 times more return on investment than Music Broadcast. However, Chalet Hotels is 1.21 times more volatile than Music Broadcast Limited. It trades about 0.06 of its potential returns per unit of risk. Music Broadcast Limited is currently generating about -0.17 per unit of risk. If you would invest  89,545  in Chalet Hotels Limited on September 25, 2024 and sell it today you would earn a total of  6,640  from holding Chalet Hotels Limited or generate 7.42% return on investment over 90 days.

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

Chalet Hotels Limited  vs.  Music Broadcast Limited

Chalet Hotels Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chalet Hotels Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Chalet Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Music Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Music Broadcast Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Chalet Hotels and Music Broadcast

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

The idea behind Chalet Hotels Limited and Music Broadcast 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.