Correlation Between EIH Associated and KIOCL

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

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

Diversification Opportunities for EIH Associated and KIOCL

0.77

Correlation Coefficient

EIH Associated  KIOCL

Poor diversification

The 3 months correlation between EIH and KIOCL is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding EIH Associated Hotels and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and EIH Associated 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 EIH Associated Hotels are associated (or correlated) with KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of EIH Associated i.e., EIH Associated and KIOCL go up and down completely randomly.

Pair Corralation between EIH Associated and KIOCL

Assuming the 90 days trading horizon EIH Associated Hotels is expected to generate 0.66 times more return on investment than KIOCL. However, EIH Associated Hotels is 1.51 times less risky than KIOCL. It trades about 0.02 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.03 per unit of risk. If you would invest  39,935  in EIH Associated Hotels on September 5, 2024 and sell it today you would earn a total of  575.00  from holding EIH Associated Hotels or generate 1.44% return on investment over 90 days.

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

EIH Associated Hotels  vs.  KIOCL Limited

EIH Associated Hotels

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 1 (%) 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.

KIOCL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIOCL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, KIOCL is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with EIH Associated and KIOCL

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

The idea behind EIH Associated Hotels and KIOCL 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.