Correlation Between Lakshmi Finance and Entertainment Network

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

Diversification Opportunities for Lakshmi Finance and Entertainment Network

0.85

Correlation Coefficient

Lakshmi Finance  Entertainment Network

Very poor diversification

The 3 months correlation between Lakshmi and Entertainment is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and Entertainment Network Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entertainment Network 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 Entertainment Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entertainment Network has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and Entertainment Network go up and down completely randomly.

Pair Corralation between Lakshmi Finance and Entertainment Network

Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to generate 1.25 times more return on investment than Entertainment Network. However, Lakshmi Finance is 1.25 times more volatile than Entertainment Network Limited. It trades about 0.06 of its potential returns per unit of risk. Entertainment Network Limited is currently generating about 0.03 per unit of risk. If you would invest  11,624  in Lakshmi Finance Industrial on October 11, 2024 and sell it today you would earn a total of  13,025  from holding Lakshmi Finance Industrial or generate 112.05% return on investment over 90 days.

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

Lakshmi Finance Industrial  vs.  Entertainment Network Limited

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lakshmi Finance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lakshmi Finance and Entertainment Network

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

The idea behind Lakshmi Finance Industrial and Entertainment Network 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.