Correlation Between Shaily Engineering and Kamat Hotels

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

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

Diversification Opportunities for Shaily Engineering and Kamat Hotels

0.26

Correlation Coefficient

Shaily Engineering  Kamat Hotels

Modest diversification

The 3 months correlation between Shaily and Kamat is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics and Kamat Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kamat Hotels Limited and Shaily Engineering 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 Shaily Engineering Plastics are associated (or correlated) with Kamat Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kamat Hotels Limited has no effect on the direction of Shaily Engineering i.e., Shaily Engineering and Kamat Hotels go up and down completely randomly.

Pair Corralation between Shaily Engineering and Kamat Hotels

Assuming the 90 days trading horizon Shaily Engineering Plastics is expected to generate 1.14 times more return on investment than Kamat Hotels. However, Shaily Engineering is 1.14 times more volatile than Kamat Hotels Limited. It trades about 0.12 of its potential returns per unit of risk. Kamat Hotels Limited is currently generating about 0.01 per unit of risk. If you would invest  102,795  in Shaily Engineering Plastics on September 2, 2024 and sell it today you would earn a total of  26,940  from holding Shaily Engineering Plastics or generate 26.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shaily Engineering Plastics  vs.  Kamat Hotels Limited

Shaily Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Kamat Hotels Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kamat Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kamat Hotels is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shaily Engineering and Kamat Hotels

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

The idea behind Shaily Engineering Plastics and Kamat 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.