Correlation Between Lemon Tree and Sarthak Metals

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

Diversification Opportunities for Lemon Tree and Sarthak Metals

-0.42

Correlation Coefficient

Lemon Tree  Sarthak Metals

Very good diversification

The 3 months correlation between Lemon and Sarthak is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals 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 Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Lemon Tree i.e., Lemon Tree and Sarthak Metals go up and down completely randomly.

Pair Corralation between Lemon Tree and Sarthak Metals

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 0.63 times more return on investment than Sarthak Metals. However, Lemon Tree Hotels is 1.59 times less risky than Sarthak Metals. It trades about 0.07 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about 0.02 per unit of risk. If you would invest  7,965  in Lemon Tree Hotels on October 4, 2024 and sell it today you would earn a total of  7,331  from holding Lemon Tree Hotels or generate 92.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Lemon Tree Hotels  vs.  Sarthak Metals Limited

Lemon Tree Hotels

Risk-Adjusted Performance

19 of 100

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.

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lemon Tree and Sarthak Metals

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

The idea behind Lemon Tree Hotels and Sarthak Metals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.