Correlation Between Lemon Tree and AUTHUM INVESTMENT

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

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

Diversification Opportunities for Lemon Tree and AUTHUM INVESTMENT

0.68

Correlation Coefficient

Lemon Tree  AUTHUM INVESTMENT

Poor diversification

The 3 months correlation between Lemon and AUTHUM is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and AUTHUM INVESTMENT INFRASTRUCTU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTHUM INVESTMENT and Lemon Tree 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 Lemon Tree Hotels are associated (or correlated) with AUTHUM INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTHUM INVESTMENT has no effect on the direction of Lemon Tree i.e., Lemon Tree and AUTHUM INVESTMENT go up and down completely randomly.

Pair Corralation between Lemon Tree and AUTHUM INVESTMENT

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 0.83 times more return on investment than AUTHUM INVESTMENT. However, Lemon Tree Hotels is 1.2 times less risky than AUTHUM INVESTMENT. It trades about -0.01 of its potential returns per unit of risk. AUTHUM INVESTMENT INFRASTRUCTU is currently generating about -0.01 per unit of risk. If you would invest  13,059  in Lemon Tree Hotels on November 29, 2024 and sell it today you would lose (415.00) from holding Lemon Tree Hotels or give up 3.18% of portfolio value over 90 days.

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

Lemon Tree Hotels  vs.  AUTHUM INVESTMENT INFRASTRUCTU

Lemon Tree Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lemon Tree Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Lemon Tree is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AUTHUM INVESTMENT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Lemon Tree and AUTHUM INVESTMENT

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

The idea behind Lemon Tree Hotels and AUTHUM INVESTMENT INFRASTRUCTU 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.