Correlation Between Jayant Agro and LT Foods

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

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

Diversification Opportunities for Jayant Agro and LT Foods

0.54

Correlation Coefficient

Jayant Agro  LT Foods

Very weak diversification

The 3 months correlation between Jayant and LTFOODS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jayant Agro Organics 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 Jayant Agro 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 Jayant Agro Organics 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 Jayant Agro i.e., Jayant Agro and LT Foods go up and down completely randomly.

Pair Corralation between Jayant Agro and LT Foods

Assuming the 90 days trading horizon Jayant Agro Organics is expected to under-perform the LT Foods. But the stock apears to be less risky and, when comparing its historical volatility, Jayant Agro Organics is 1.47 times less risky than LT Foods. The stock trades about -0.02 of its potential returns per unit of risk. The LT Foods Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  38,348  in LT Foods Limited on September 2, 2024 and sell it today you would earn a total of  1,362  from holding LT Foods Limited or generate 3.55% return on investment over 90 days.

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

Jayant Agro Organics  vs.  LT Foods Limited

Jayant Agro Organics

Risk-Adjusted Performance

0 of 100

Very Weak

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

LT Foods Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, LT Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jayant Agro and LT Foods

The main advantage of trading using opposite Jayant Agro and LT Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jayant Agro 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 Jayant Agro Organics 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.