Correlation Between Indian Hotels and Taj GVK

Can any of the company-specific risk be diversified away by investing in both Indian Hotels and Taj GVK 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 Taj GVK 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 Taj GVK Hotels, you can compare the effects of market volatilities on Indian Hotels and Taj GVK 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 Taj GVK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Hotels and Taj GVK.

Diversification Opportunities for Indian Hotels and Taj GVK

0.92

Correlation Coefficient

Indian Hotels  Taj GVK

Almost no diversification

The 3 months correlation between Indian and Taj is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and Taj GVK Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taj GVK Hotels 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 Taj GVK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taj GVK Hotels has no effect on the direction of Indian Hotels i.e., Indian Hotels and Taj GVK go up and down completely randomly.

Pair Corralation between Indian Hotels and Taj GVK

Assuming the 90 days trading horizon The Indian Hotels is expected to generate 0.83 times more return on investment than Taj GVK. However, The Indian Hotels is 1.2 times less risky than Taj GVK. It trades about 0.15 of its potential returns per unit of risk. Taj GVK Hotels is currently generating about 0.03 per unit of risk. If you would invest  62,440  in The Indian Hotels on September 25, 2024 and sell it today you would earn a total of  23,500  from holding The Indian Hotels or generate 37.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.19%
Values	Daily Returns

The Indian Hotels  vs.  Taj GVK Hotels

Indian Hotels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 13 (%) 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.

Taj GVK Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Taj GVK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indian Hotels and Taj GVK

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

The idea behind The Indian Hotels and Taj GVK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.