Correlation Between Modi Rubber and Indian Hotels

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

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

Diversification Opportunities for Modi Rubber and Indian Hotels

0.0

Correlation Coefficient

Modi Rubber  Indian Hotels

Pay attention - limited upside

The 3 months correlation between Modi and Indian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber Limited and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels and Modi Rubber 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 Modi Rubber Limited 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 Modi Rubber i.e., Modi Rubber and Indian Hotels go up and down completely randomly.

Pair Corralation between Modi Rubber and Indian Hotels

Assuming the 90 days trading horizon Modi Rubber Limited is expected to under-perform the Indian Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Modi Rubber Limited is 1.04 times less risky than Indian Hotels. The stock trades about -0.07 of its potential returns per unit of risk. The The Indian Hotels is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  70,090  in The Indian Hotels on September 12, 2024 and sell it today you would earn a total of  13,765  from holding The Indian Hotels or generate 19.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Modi Rubber Limited  vs.  The Indian Hotels

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 unfluctuating basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modi Rubber and Indian Hotels

The main advantage of trading using opposite Modi Rubber and Indian Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modi Rubber 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 Modi Rubber Limited 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.

Check out your portfolio center.

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 .