Correlation Between Lemon Tree and Shyam Telecom

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

Diversification Opportunities for Lemon Tree and Shyam Telecom

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Lemon and Shyam is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Shyam Telecom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyam Telecom Limited 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 Shyam Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyam Telecom Limited has no effect on the direction of Lemon Tree i.e., Lemon Tree and Shyam Telecom go up and down completely randomly.

Pair Corralation between Lemon Tree and Shyam Telecom

Assuming the 90 days trading horizon Lemon Tree is expected to generate 1.43 times less return on investment than Shyam Telecom. But when comparing it to its historical volatility, Lemon Tree Hotels is 2.12 times less risky than Shyam Telecom. It trades about 0.25 of its potential returns per unit of risk. Shyam Telecom Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,335  in Shyam Telecom Limited on October 3, 2024 and sell it today you would earn a total of  547.00  from holding Shyam Telecom Limited or generate 40.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lemon Tree Hotels  vs.  Shyam Telecom Limited

 Performance 
       Timeline  
Lemon Tree Hotels 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec120130140150
Shyam Telecom Limited 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Telecom Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Shyam Telecom exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec1520253035

Lemon Tree and Shyam Telecom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lemon Tree and Shyam Telecom

The main advantage of trading using opposite Lemon Tree and Shyam Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lemon Tree position performs unexpectedly, Shyam Telecom 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 Shyam Telecom will offset losses from the drop in Shyam Telecom's long position.
The idea behind Lemon Tree Hotels and Shyam Telecom 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.
Check out your portfolio center.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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