Correlation Between Lakshmi Finance and Alkali Metals

Can any of the company-specific risk be diversified away by investing in both Lakshmi Finance and Alkali 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 Lakshmi Finance and Alkali Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lakshmi Finance Industrial and Alkali Metals Limited, you can compare the effects of market volatilities on Lakshmi Finance and Alkali 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 Lakshmi Finance with a short position of Alkali Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lakshmi Finance and Alkali Metals.

Diversification Opportunities for Lakshmi Finance and Alkali Metals

0.18

Correlation Coefficient

Lakshmi Finance  Alkali Metals

Average diversification

The 3 months correlation between Lakshmi and Alkali is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and Alkali Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkali Metals Limited and Lakshmi Finance 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 Lakshmi Finance Industrial are associated (or correlated) with Alkali Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkali Metals Limited has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and Alkali Metals go up and down completely randomly.

Pair Corralation between Lakshmi Finance and Alkali Metals

Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to generate 1.31 times more return on investment than Alkali Metals. However, Lakshmi Finance is 1.31 times more volatile than Alkali Metals Limited. It trades about 0.03 of its potential returns per unit of risk. Alkali Metals Limited is currently generating about 0.02 per unit of risk. If you would invest  22,554  in Lakshmi Finance Industrial on September 2, 2024 and sell it today you would earn a total of  401.00  from holding Lakshmi Finance Industrial or generate 1.78% return on investment over 90 days.

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

Lakshmi Finance Industrial  vs.  Alkali Metals Limited

Lakshmi Finance Indu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lakshmi Finance Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lakshmi Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alkali Metals Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alkali Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lakshmi Finance and Alkali Metals

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

The idea behind Lakshmi Finance Industrial and Alkali 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.