Correlation Between Lakshmi Finance and Paradeep Phosphates

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

Diversification Opportunities for Lakshmi Finance and Paradeep Phosphates

-0.71

Correlation Coefficient

Lakshmi Finance  Paradeep Phosphates

Pay attention - limited upside

The 3 months correlation between Lakshmi and Paradeep is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and Paradeep Phosphates Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradeep Phosphates 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 Paradeep Phosphates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradeep Phosphates has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and Paradeep Phosphates go up and down completely randomly.

Pair Corralation between Lakshmi Finance and Paradeep Phosphates

Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to under-perform the Paradeep Phosphates. But the stock apears to be less risky and, when comparing its historical volatility, Lakshmi Finance Industrial is 1.38 times less risky than Paradeep Phosphates. The stock trades about -0.14 of its potential returns per unit of risk. The Paradeep Phosphates Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,492  in Paradeep Phosphates Limited on October 8, 2024 and sell it today you would earn a total of  3,536  from holding Paradeep Phosphates Limited or generate 41.64% return on investment over 90 days.

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

Lakshmi Finance Industrial  vs.  Paradeep Phosphates 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 uncertain 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.

Paradeep Phosphates

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paradeep Phosphates Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Paradeep Phosphates exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lakshmi Finance and Paradeep Phosphates

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

The idea behind Lakshmi Finance Industrial and Paradeep Phosphates 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 CEOs Directory module to screen CEOs from public companies around the world.