Correlation Between Cholamandalam Financial and Indian Hotels

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

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

Diversification Opportunities for Cholamandalam Financial and Indian Hotels

-0.44

Correlation Coefficient

Cholamandalam Financial  Indian Hotels

Very good diversification

The 3 months correlation between Cholamandalam and Indian is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels and Cholamandalam Financial 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 Cholamandalam Financial Holdings are associated (or correlated) with Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Indian Hotels go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Indian Hotels

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to under-perform the Indian Hotels. In addition to that, Cholamandalam Financial is 1.14 times more volatile than The Indian Hotels. It trades about 0.0 of its total potential returns per unit of risk. The Indian Hotels is currently generating about 0.16 per unit of volatility. If you would invest  65,590  in The Indian Hotels on September 2, 2024 and sell it today you would earn a total of  13,745  from holding The Indian Hotels or generate 20.96% return on investment over 90 days.

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

Cholamandalam Financial Holdin  vs.  The Indian Hotels

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cholamandalam Financial is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Indian Hotels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cholamandalam Financial and Indian Hotels

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

The idea behind Cholamandalam Financial Holdings and The Indian 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..