Correlation Between Indian Hotels and RBL Bank

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

Diversification Opportunities for Indian Hotels and RBL Bank

-0.49

Correlation Coefficient

Indian Hotels  RBL Bank

Very good diversification

The 3 months correlation between Indian and RBL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Indian Hotels and RBL Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBL Bank Limited 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 RBL Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBL Bank Limited has no effect on the direction of Indian Hotels i.e., Indian Hotels and RBL Bank go up and down completely randomly.

Pair Corralation between Indian Hotels and RBL Bank

Assuming the 90 days trading horizon The Indian Hotels is expected to under-perform the RBL Bank. But the stock apears to be less risky and, when comparing its historical volatility, The Indian Hotels is 1.4 times less risky than RBL Bank. The stock trades about -0.02 of its potential returns per unit of risk. The RBL Bank Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  18,809  in RBL Bank Limited on April 25, 2025 and sell it today you would earn a total of  7,083  from holding RBL Bank Limited or generate 37.66% return on investment over 90 days.

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

The Indian Hotels  vs.  RBL Bank Limited

Indian Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Indian Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Indian Hotels is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

RBL Bank Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBL Bank Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, RBL Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Hotels and RBL Bank

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

The idea behind The Indian Hotels and RBL Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.