Correlation Between Lake Materials and Kisan Telecom

Can any of the company-specific risk be diversified away by investing in both Lake Materials and Kisan Telecom 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 Lake Materials and Kisan Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lake Materials Co and Kisan Telecom Co, you can compare the effects of market volatilities on Lake Materials and Kisan Telecom 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 Lake Materials with a short position of Kisan Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Kisan Telecom.

Diversification Opportunities for Lake Materials and Kisan Telecom

0.32

Correlation Coefficient

Lake Materials  Kisan Telecom

Weak diversification

The 3 months correlation between Lake and Kisan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Kisan Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kisan Telecom and Lake Materials 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 Lake Materials Co are associated (or correlated) with Kisan Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kisan Telecom has no effect on the direction of Lake Materials i.e., Lake Materials and Kisan Telecom go up and down completely randomly.

Pair Corralation between Lake Materials and Kisan Telecom

Assuming the 90 days trading horizon Lake Materials Co is expected to generate 2.63 times more return on investment than Kisan Telecom. However, Lake Materials is 2.63 times more volatile than Kisan Telecom Co. It trades about -0.02 of its potential returns per unit of risk. Kisan Telecom Co is currently generating about -0.09 per unit of risk. If you would invest  1,868,000  in Lake Materials Co on October 6, 2024 and sell it today you would lose (699,000) from holding Lake Materials Co or give up 37.42% of portfolio value over 90 days.

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

Lake Materials Co  vs.  Kisan Telecom Co

Lake Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kisan Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kisan Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kisan Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lake Materials and Kisan Telecom

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

The idea behind Lake Materials Co and Kisan Telecom Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.