Correlation Between KEI Industries and LT Foods

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

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

Diversification Opportunities for KEI Industries and LT Foods

0.78

Correlation Coefficient

KEI Industries  LT Foods

Poor diversification

The 3 months correlation between KEI and LTFOODS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KEI Industries Limited 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 KEI Industries 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 KEI Industries Limited 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 KEI Industries i.e., KEI Industries and LT Foods go up and down completely randomly.

Pair Corralation between KEI Industries and LT Foods

Assuming the 90 days trading horizon KEI Industries Limited is expected to under-perform the LT Foods. But the stock apears to be less risky and, when comparing its historical volatility, KEI Industries Limited is 1.34 times less risky than LT Foods. The stock trades about -0.07 of its potential returns per unit of risk. The LT Foods Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  41,493  in LT Foods Limited on October 15, 2024 and sell it today you would lose (2,888) from holding LT Foods Limited or give up 6.96% of portfolio value over 90 days.

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

KEI Industries Limited  vs.  LT Foods Limited

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

LT Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LT Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LT Foods is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KEI Industries and LT Foods

The main advantage of trading using opposite KEI Industries and LT Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEI Industries 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 KEI Industries Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.