Correlation Between LT Foods and Silly Monks

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

Diversification Opportunities for LT Foods and Silly Monks

0.31

Correlation Coefficient

LT Foods  Silly Monks

Weak diversification

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

Pair Corralation between LT Foods and Silly Monks

Assuming the 90 days trading horizon LT Foods Limited is expected to generate 0.88 times more return on investment than Silly Monks. However, LT Foods Limited is 1.14 times less risky than Silly Monks. It trades about 0.13 of its potential returns per unit of risk. Silly Monks Entertainment is currently generating about 0.01 per unit of risk. If you would invest  16,096  in LT Foods Limited on September 26, 2024 and sell it today you would earn a total of  24,274  from holding LT Foods Limited or generate 150.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	58.52%
Values	Daily Returns

LT Foods Limited  vs.  Silly Monks Entertainment

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.

Silly Monks Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silly Monks Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Silly Monks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LT Foods and Silly Monks

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

The idea behind LT Foods Limited and Silly Monks Entertainment 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.