Correlation Between Amrutanjan Health and LT Foods

Can any of the company-specific risk be diversified away by investing in both Amrutanjan Health and LT Foods 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 Amrutanjan Health and LT Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amrutanjan Health Care and LT Foods Limited, you can compare the effects of market volatilities on Amrutanjan Health and LT Foods 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 Amrutanjan Health with a short position of LT Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amrutanjan Health and LT Foods.

Diversification Opportunities for Amrutanjan Health and LT Foods

0.65

Correlation Coefficient

Amrutanjan Health  LT Foods

Poor diversification

The 3 months correlation between Amrutanjan and LTFOODS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amrutanjan Health Care and LT Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LT Foods Limited and Amrutanjan Health 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 Amrutanjan Health Care are associated (or correlated) with LT Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LT Foods Limited has no effect on the direction of Amrutanjan Health i.e., Amrutanjan Health and LT Foods go up and down completely randomly.

Pair Corralation between Amrutanjan Health and LT Foods

Assuming the 90 days trading horizon Amrutanjan Health is expected to generate 4.93 times less return on investment than LT Foods. But when comparing it to its historical volatility, Amrutanjan Health Care is 1.87 times less risky than LT Foods. It trades about 0.01 of its potential returns per unit of risk. LT Foods Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  40,574  in LT Foods Limited on September 23, 2024 and sell it today you would earn a total of  646.00  from holding LT Foods Limited or generate 1.59% return on investment over 90 days.

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

Amrutanjan Health Care  vs.  LT Foods Limited

Amrutanjan Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

LT Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Amrutanjan Health and LT Foods

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

The idea behind Amrutanjan Health Care and LT Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.