Correlation Between LT Foods and APL Apollo

Can any of the company-specific risk be diversified away by investing in both LT Foods and APL Apollo 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 LT Foods and APL Apollo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LT Foods Limited and APL Apollo Tubes, you can compare the effects of market volatilities on LT Foods and APL Apollo 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 LT Foods with a short position of APL Apollo. Check out your portfolio center. Please also check ongoing floating volatility patterns of LT Foods and APL Apollo.

Diversification Opportunities for LT Foods and APL Apollo

0.31

Correlation Coefficient

LT Foods  APL Apollo

Weak diversification

The 3 months correlation between LTFOODS and APL is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LT Foods Limited and APL Apollo Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APL Apollo Tubes and LT Foods 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 LT Foods Limited are associated (or correlated) with APL Apollo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APL Apollo Tubes has no effect on the direction of LT Foods i.e., LT Foods and APL Apollo go up and down completely randomly.

Pair Corralation between LT Foods and APL Apollo

Assuming the 90 days trading horizon LT Foods Limited is expected to generate 1.34 times more return on investment than APL Apollo. However, LT Foods is 1.34 times more volatile than APL Apollo Tubes. It trades about 0.39 of its potential returns per unit of risk. APL Apollo Tubes is currently generating about 0.21 per unit of risk. If you would invest  36,550  in LT Foods Limited on September 14, 2024 and sell it today you would earn a total of  6,965  from holding LT Foods Limited or generate 19.06% return on investment over 90 days.

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

LT Foods Limited  vs.  APL Apollo Tubes

LT Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LT Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

APL Apollo Tubes

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in APL Apollo Tubes are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, APL Apollo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LT Foods and APL Apollo

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

The idea behind LT Foods Limited and APL Apollo Tubes 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.