Correlation Between Gujarat Alkalies and Oriental Hotels

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

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

Diversification Opportunities for Gujarat Alkalies and Oriental Hotels

-0.25

Correlation Coefficient

Gujarat Alkalies  Oriental Hotels

Very good diversification

The 3 months correlation between Gujarat and Oriental is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Alkalies and and Oriental Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Hotels and Gujarat Alkalies 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 Gujarat Alkalies and are associated (or correlated) with Oriental Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Hotels has no effect on the direction of Gujarat Alkalies i.e., Gujarat Alkalies and Oriental Hotels go up and down completely randomly.

Pair Corralation between Gujarat Alkalies and Oriental Hotels

Assuming the 90 days trading horizon Gujarat Alkalies and is expected to under-perform the Oriental Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Alkalies and is 1.57 times less risky than Oriental Hotels. The stock trades about -0.11 of its potential returns per unit of risk. The Oriental Hotels Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  18,108  in Oriental Hotels Limited on September 29, 2024 and sell it today you would lose (564.00) from holding Oriental Hotels Limited or give up 3.11% of portfolio value over 90 days.

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

Gujarat Alkalies and  vs.  Oriental Hotels Limited

Gujarat Alkalies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Oriental Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Oriental Hotels is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gujarat Alkalies and Oriental Hotels

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

The idea behind Gujarat Alkalies and and Oriental Hotels 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .