Correlation Between Lakshmi Finance and HMT

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

Diversification Opportunities for Lakshmi Finance and HMT

0.37

Correlation Coefficient

Lakshmi Finance  HMT

Weak diversification

The 3 months correlation between Lakshmi and HMT is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT 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 HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and HMT go up and down completely randomly.

Pair Corralation between Lakshmi Finance and HMT

Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to generate 1.76 times more return on investment than HMT. However, Lakshmi Finance is 1.76 times more volatile than HMT Limited. It trades about 0.01 of its potential returns per unit of risk. HMT Limited is currently generating about -0.14 per unit of risk. If you would invest  24,147  in Lakshmi Finance Industrial on September 12, 2024 and sell it today you would lose (447.00) from holding Lakshmi Finance Industrial or give up 1.85% of portfolio value over 90 days.

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

Lakshmi Finance Industrial  vs.  HMT Limited

Lakshmi Finance Indu

Risk-Adjusted Performance

1 of 100

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.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lakshmi Finance and HMT

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

The idea behind Lakshmi Finance Industrial and HMT 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.