Correlation Between Asian Hotels and Agro Tech

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Can any of the company-specific risk be diversified away by investing in both Asian Hotels and Agro Tech 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 Asian Hotels and Agro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asian Hotels Limited and Agro Tech Foods, you can compare the effects of market volatilities on Asian Hotels and Agro Tech 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 Asian Hotels with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Hotels and Agro Tech.

Diversification Opportunities for Asian Hotels and Agro Tech

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Asian and Agro is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Asian Hotels Limited and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Asian 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 Asian Hotels Limited are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Asian Hotels i.e., Asian Hotels and Agro Tech go up and down completely randomly.

Pair Corralation between Asian Hotels and Agro Tech

Assuming the 90 days trading horizon Asian Hotels Limited is expected to generate 2.3 times more return on investment than Agro Tech. However, Asian Hotels is 2.3 times more volatile than Agro Tech Foods. It trades about 0.43 of its potential returns per unit of risk. Agro Tech Foods is currently generating about 0.08 per unit of risk. If you would invest  19,884  in Asian Hotels Limited on October 20, 2024 and sell it today you would earn a total of  10,036  from holding Asian Hotels Limited or generate 50.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Asian Hotels Limited  vs.  Agro Tech Foods

 Performance 
       Timeline  
Asian Hotels Limited 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.
Agro Tech Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Agro Tech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Asian Hotels and Agro Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Asian Hotels and Agro Tech

The main advantage of trading using opposite Asian Hotels and Agro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asian Hotels position performs unexpectedly, Agro Tech 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 Agro Tech will offset losses from the drop in Agro Tech's long position.
The idea behind Asian Hotels Limited and Agro Tech Foods 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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