Correlation Between Lemon Tree and DIAMINES AND

Can any of the company-specific risk be diversified away by investing in both Lemon Tree and DIAMINES AND 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 DIAMINES AND 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 DIAMINES AND CHEMICALS, you can compare the effects of market volatilities on Lemon Tree and DIAMINES AND 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 DIAMINES AND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemon Tree and DIAMINES AND.

Diversification Opportunities for Lemon Tree and DIAMINES AND

0.02

Correlation Coefficient

Lemon Tree  DIAMINES AND

Significant diversification

The 3 months correlation between Lemon and DIAMINES is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and DIAMINES AND CHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIAMINES AND CHEMICALS 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 DIAMINES AND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIAMINES AND CHEMICALS has no effect on the direction of Lemon Tree i.e., Lemon Tree and DIAMINES AND go up and down completely randomly.

Pair Corralation between Lemon Tree and DIAMINES AND

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 0.78 times more return on investment than DIAMINES AND. However, Lemon Tree Hotels is 1.29 times less risky than DIAMINES AND. It trades about 0.18 of its potential returns per unit of risk. DIAMINES AND CHEMICALS is currently generating about -0.07 per unit of risk. If you would invest  12,576  in Lemon Tree Hotels on September 21, 2024 and sell it today you would earn a total of  2,760  from holding Lemon Tree Hotels or generate 21.95% return on investment over 90 days.

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

Lemon Tree Hotels  vs.  DIAMINES AND CHEMICALS

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 inconsistent basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.

DIAMINES AND CHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DIAMINES AND CHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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.

Pair Trading with Lemon Tree and DIAMINES AND

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

The idea behind Lemon Tree Hotels and DIAMINES AND CHEMICALS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.