Correlation Between Lemon Tree and Infomedia Press

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

Diversification Opportunities for Lemon Tree and Infomedia Press

-0.43

Correlation Coefficient

Lemon Tree  Infomedia Press

Very good diversification

The 3 months correlation between Lemon and Infomedia is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Infomedia Press Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infomedia Press 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 Infomedia Press. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infomedia Press has no effect on the direction of Lemon Tree i.e., Lemon Tree and Infomedia Press go up and down completely randomly.

Pair Corralation between Lemon Tree and Infomedia Press

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 0.53 times more return on investment than Infomedia Press. However, Lemon Tree Hotels is 1.9 times less risky than Infomedia Press. It trades about -0.02 of its potential returns per unit of risk. Infomedia Press Limited is currently generating about -0.02 per unit of risk. If you would invest  13,457  in Lemon Tree Hotels on September 3, 2024 and sell it today you would lose (398.00) from holding Lemon Tree Hotels or give up 2.96% of portfolio value over 90 days.

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

Lemon Tree Hotels  vs.  Infomedia Press Limited

Lemon Tree Hotels

Risk-Adjusted Performance

0 of 100

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Infomedia Press

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infomedia Press Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Infomedia Press is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lemon Tree and Infomedia Press

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

The idea behind Lemon Tree Hotels and Infomedia Press 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 Transaction History module to view history of all your transactions and understand their impact on performance.