Correlation Between Lemon Tree and Venus Pipes

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

Diversification Opportunities for Lemon Tree and Venus Pipes

-0.74

Correlation Coefficient

Lemon Tree  Venus Pipes

Pay attention - limited upside

The 3 months correlation between Lemon and Venus is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Venus Pipes Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Venus Pipes Tubes 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 Venus Pipes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Venus Pipes Tubes has no effect on the direction of Lemon Tree i.e., Lemon Tree and Venus Pipes go up and down completely randomly.

Pair Corralation between Lemon Tree and Venus Pipes

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 0.89 times more return on investment than Venus Pipes. However, Lemon Tree Hotels is 1.12 times less risky than Venus Pipes. It trades about 0.22 of its potential returns per unit of risk. Venus Pipes Tubes is currently generating about -0.19 per unit of risk. If you would invest  11,552  in Lemon Tree Hotels on October 23, 2024 and sell it today you would earn a total of  3,217  from holding Lemon Tree Hotels or generate 27.85% return on investment over 90 days.

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

Lemon Tree Hotels  vs.  Venus Pipes Tubes

Lemon Tree Hotels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 17 (%) 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.

Venus Pipes Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Venus Pipes Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lemon Tree and Venus Pipes

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

The idea behind Lemon Tree Hotels and Venus Pipes Tubes 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.