Correlation Between Gujarat Narmada and Lakshmi Finance

Can any of the company-specific risk be diversified away by investing in both Gujarat Narmada and Lakshmi Finance 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 Gujarat Narmada and Lakshmi Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gujarat Narmada Valley and Lakshmi Finance Industrial, you can compare the effects of market volatilities on Gujarat Narmada and Lakshmi Finance 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 Gujarat Narmada with a short position of Lakshmi Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Narmada and Lakshmi Finance.

Diversification Opportunities for Gujarat Narmada and Lakshmi Finance

0.59

Correlation Coefficient

Gujarat Narmada  Lakshmi Finance

Very weak diversification

The 3 months correlation between Gujarat and Lakshmi is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Lakshmi Finance Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Finance Indu and Gujarat Narmada 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 Gujarat Narmada Valley are associated (or correlated) with Lakshmi Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Finance Indu has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Lakshmi Finance go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Lakshmi Finance

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to generate 0.68 times more return on investment than Lakshmi Finance. However, Gujarat Narmada Valley is 1.47 times less risky than Lakshmi Finance. It trades about -0.1 of its potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about -0.11 per unit of risk. If you would invest  58,250  in Gujarat Narmada Valley on December 24, 2024 and sell it today you would lose (9,150) from holding Gujarat Narmada Valley or give up 15.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Gujarat Narmada Valley  vs.  Lakshmi Finance Industrial

Gujarat Narmada Valley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Narmada Valley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lakshmi Finance Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gujarat Narmada and Lakshmi Finance

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

The idea behind Gujarat Narmada Valley and Lakshmi Finance Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.