Correlation Between Indian Hotels and Ganesh Housing

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

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

Diversification Opportunities for Indian Hotels and Ganesh Housing

0.79

Correlation Coefficient

Indian Hotels  Ganesh Housing

Poor diversification

The 3 months correlation between Indian and Ganesh is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Ganesh Housing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganesh Housing and Indian 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 The Indian Hotels are associated (or correlated) with Ganesh Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganesh Housing has no effect on the direction of Indian Hotels i.e., Indian Hotels and Ganesh Housing go up and down completely randomly.

Pair Corralation between Indian Hotels and Ganesh Housing

Assuming the 90 days trading horizon Indian Hotels is expected to generate 1.75 times less return on investment than Ganesh Housing. But when comparing it to its historical volatility, The Indian Hotels is 1.67 times less risky than Ganesh Housing. It trades about 0.15 of its potential returns per unit of risk. Ganesh Housing is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  87,650  in Ganesh Housing on September 23, 2024 and sell it today you would earn a total of  31,170  from holding Ganesh Housing or generate 35.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

The Indian Hotels  vs.  Ganesh Housing

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 conflicting basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ganesh Housing

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ganesh Housing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Ganesh Housing demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Hotels and Ganesh Housing

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

The idea behind The Indian Hotels and Ganesh Housing 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.