Correlation Between Kaushalya Infrastructure and Lemon Tree

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

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

Diversification Opportunities for Kaushalya Infrastructure and Lemon Tree

0.44

Correlation Coefficient

Kaushalya Infrastructure  Lemon Tree

Very weak diversification

The 3 months correlation between Kaushalya and Lemon is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kaushalya Infrastructure Devel 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 Kaushalya Infrastructure 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 Kaushalya Infrastructure Development 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 Kaushalya Infrastructure i.e., Kaushalya Infrastructure and Lemon Tree go up and down completely randomly.

Pair Corralation between Kaushalya Infrastructure and Lemon Tree

Assuming the 90 days trading horizon Kaushalya Infrastructure Development is expected to generate 1.56 times more return on investment than Lemon Tree. However, Kaushalya Infrastructure is 1.56 times more volatile than Lemon Tree Hotels. It trades about 0.06 of its potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.07 per unit of risk. If you would invest  50,000  in Kaushalya Infrastructure Development on September 23, 2024 and sell it today you would earn a total of  41,760  from holding Kaushalya Infrastructure Development or generate 83.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.93%
Values	Daily Returns

Kaushalya Infrastructure Devel  vs.  Lemon Tree Hotels

Kaushalya Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaushalya Infrastructure Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Kaushalya Infrastructure is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lemon Tree Hotels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaushalya Infrastructure and Lemon Tree

The main advantage of trading using opposite Kaushalya Infrastructure and Lemon Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaushalya Infrastructure 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 Kaushalya Infrastructure Development 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.