Correlation Between Chemcon Speciality and Lemon Tree

Can any of the company-specific risk be diversified away by investing in both Chemcon Speciality and Lemon Tree 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 Chemcon Speciality and Lemon Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chemcon Speciality Chemicals and Lemon Tree Hotels, you can compare the effects of market volatilities on Chemcon Speciality and Lemon Tree 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 Chemcon Speciality with a short position of Lemon Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemcon Speciality and Lemon Tree.

Diversification Opportunities for Chemcon Speciality and Lemon Tree

0.39

Correlation Coefficient

Chemcon Speciality  Lemon Tree

Weak diversification

The 3 months correlation between Chemcon and Lemon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Chemcon Speciality Chemicals and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels and Chemcon Speciality 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 Chemcon Speciality Chemicals are associated (or correlated) with Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of Chemcon Speciality i.e., Chemcon Speciality and Lemon Tree go up and down completely randomly.

Pair Corralation between Chemcon Speciality and Lemon Tree

Assuming the 90 days trading horizon Chemcon Speciality Chemicals is expected to under-perform the Lemon Tree. In addition to that, Chemcon Speciality is 1.03 times more volatile than Lemon Tree Hotels. It trades about -0.06 of its total potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.0 per unit of volatility. If you would invest  13,252  in Lemon Tree Hotels on September 2, 2024 and sell it today you would lose (193.00) from holding Lemon Tree Hotels or give up 1.46% of portfolio value over 90 days.

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

Chemcon Speciality Chemicals  vs.  Lemon Tree Hotels

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lemon Tree Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lemon Tree Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Lemon Tree is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chemcon Speciality and Lemon Tree

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

The idea behind Chemcon Speciality Chemicals and Lemon Tree Hotels 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.