Correlation Between Modi Rubber and Samhi Hotels

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

Diversification Opportunities for Modi Rubber and Samhi Hotels

0.73

Correlation Coefficient

Modi Rubber  Samhi Hotels

Poor diversification

The 3 months correlation between Modi and Samhi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber Limited and Samhi Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhi Hotels Limited 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 Samhi Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhi Hotels Limited has no effect on the direction of Modi Rubber i.e., Modi Rubber and Samhi Hotels go up and down completely randomly.

Pair Corralation between Modi Rubber and Samhi Hotels

Assuming the 90 days trading horizon Modi Rubber Limited is expected to generate 1.29 times more return on investment than Samhi Hotels. However, Modi Rubber is 1.29 times more volatile than Samhi Hotels Limited. It trades about 0.03 of its potential returns per unit of risk. Samhi Hotels Limited is currently generating about -0.13 per unit of risk. If you would invest  12,717  in Modi Rubber Limited on September 4, 2024 and sell it today you would earn a total of  273.00  from holding Modi Rubber Limited or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Modi Rubber Limited  vs.  Samhi Hotels Limited

Modi Rubber Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Modi Rubber Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Samhi Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhi Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Modi Rubber and Samhi Hotels

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

The idea behind Modi Rubber Limited and Samhi 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.