Correlation Between GTL and Lakshmi Precision

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

By analyzing existing cross correlation between GTL Limited and Lakshmi Precision Screws, you can compare the effects of market volatilities on GTL and Lakshmi Precision 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 GTL with a short position of Lakshmi Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of GTL and Lakshmi Precision.

Diversification Opportunities for GTL and Lakshmi Precision

-0.08

Correlation Coefficient

GTL  Lakshmi Precision

Good diversification

The 3 months correlation between GTL and Lakshmi is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GTL Limited and Lakshmi Precision Screws in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Precision Screws and GTL 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 GTL Limited are associated (or correlated) with Lakshmi Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Precision Screws has no effect on the direction of GTL i.e., GTL and Lakshmi Precision go up and down completely randomly.

Pair Corralation between GTL and Lakshmi Precision

Assuming the 90 days trading horizon GTL is expected to generate 3.53 times less return on investment than Lakshmi Precision. In addition to that, GTL is 1.54 times more volatile than Lakshmi Precision Screws. It trades about 0.0 of its total potential returns per unit of risk. Lakshmi Precision Screws is currently generating about 0.01 per unit of volatility. If you would invest  512.00  in Lakshmi Precision Screws on August 31, 2024 and sell it today you would lose (3.00) from holding Lakshmi Precision Screws or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

GTL Limited  vs.  Lakshmi Precision Screws

GTL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lakshmi Precision Screws

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GTL and Lakshmi Precision

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

The idea behind GTL Limited and Lakshmi Precision Screws 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.