Correlation Between Lakshmi Finance and GM Breweries

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

Diversification Opportunities for Lakshmi Finance and GM Breweries

0.16

Correlation Coefficient

Lakshmi Finance  GM Breweries

Average diversification

The 3 months correlation between Lakshmi and GMBREW is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and GM Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GM Breweries 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 GM Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GM Breweries Limited has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and GM Breweries go up and down completely randomly.

Pair Corralation between Lakshmi Finance and GM Breweries

Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to generate 1.46 times more return on investment than GM Breweries. However, Lakshmi Finance is 1.46 times more volatile than GM Breweries Limited. It trades about 0.02 of its potential returns per unit of risk. GM Breweries Limited is currently generating about -0.01 per unit of risk. If you would invest  24,956  in Lakshmi Finance Industrial on September 5, 2024 and sell it today you would lose (193.00) from holding Lakshmi Finance Industrial or give up 0.77% of portfolio value over 90 days.

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

Lakshmi Finance Industrial  vs.  GM Breweries Limited

Lakshmi Finance Indu

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lakshmi Finance Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries 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 GM Breweries

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

The idea behind Lakshmi Finance Industrial and GM Breweries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.