Correlation Between LTIMindtree and FCS Software

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

By analyzing existing cross correlation between LTIMindtree Limited and FCS Software Solutions, you can compare the effects of market volatilities on LTIMindtree and FCS Software 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 LTIMindtree with a short position of FCS Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of LTIMindtree and FCS Software.

Diversification Opportunities for LTIMindtree and FCS Software

0.32

Correlation Coefficient

LTIMindtree  FCS Software

Weak diversification

The 3 months correlation between LTIMindtree and FCS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding LTIMindtree Limited and FCS Software Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FCS Software Solutions and LTIMindtree 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 LTIMindtree Limited are associated (or correlated) with FCS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FCS Software Solutions has no effect on the direction of LTIMindtree i.e., LTIMindtree and FCS Software go up and down completely randomly.

Pair Corralation between LTIMindtree and FCS Software

Assuming the 90 days trading horizon LTIMindtree Limited is expected to generate 0.53 times more return on investment than FCS Software. However, LTIMindtree Limited is 1.88 times less risky than FCS Software. It trades about 0.03 of its potential returns per unit of risk. FCS Software Solutions is currently generating about -0.03 per unit of risk. If you would invest  605,086  in LTIMindtree Limited on September 4, 2024 and sell it today you would earn a total of  16,249  from holding LTIMindtree Limited or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

LTIMindtree Limited  vs.  FCS Software Solutions

LTIMindtree Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LTIMindtree Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LTIMindtree is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

FCS Software Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FCS Software Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FCS Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LTIMindtree and FCS Software

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

The idea behind LTIMindtree Limited and FCS Software Solutions 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.