Correlation Between LT Foods and Fine Organic

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

Diversification Opportunities for LT Foods and Fine Organic

0.47

Correlation Coefficient

LT Foods  Fine Organic

Very weak diversification

The 3 months correlation between LTFOODS and Fine is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding LT Foods Limited and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries 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 Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of LT Foods i.e., LT Foods and Fine Organic go up and down completely randomly.

Pair Corralation between LT Foods and Fine Organic

Assuming the 90 days trading horizon LT Foods Limited is expected to generate 1.22 times more return on investment than Fine Organic. However, LT Foods is 1.22 times more volatile than Fine Organic Industries. It trades about 0.01 of its potential returns per unit of risk. Fine Organic Industries is currently generating about -0.08 per unit of risk. If you would invest  40,339  in LT Foods Limited on September 26, 2024 and sell it today you would earn a total of  31.00  from holding LT Foods Limited or generate 0.08% return on investment over 90 days.

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

LT Foods Limited  vs.  Fine Organic Industries

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LT Foods and Fine Organic

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

The idea behind LT Foods Limited and Fine Organic Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.