Correlation Between NIFTY SUMER and Laxmi Organic

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Can any of the company-specific risk be diversified away by investing in both NIFTY SUMER and Laxmi 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 NIFTY SUMER and Laxmi Organic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NIFTY SUMER DURABLES and Laxmi Organic Industries, you can compare the effects of market volatilities on NIFTY SUMER and Laxmi 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 NIFTY SUMER with a short position of Laxmi Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Laxmi Organic.

Diversification Opportunities for NIFTY SUMER and Laxmi Organic

NIFTYLaxmiDiversified AwayNIFTYLaxmiDiversified Away100%
0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between NIFTY and Laxmi is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Laxmi Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laxmi Organic Industries and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Laxmi Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laxmi Organic Industries has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Laxmi Organic go up and down completely randomly.
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Pair Corralation between NIFTY SUMER and Laxmi Organic

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.48 times more return on investment than Laxmi Organic. However, NIFTY SUMER DURABLES is 2.08 times less risky than Laxmi Organic. It trades about 0.05 of its potential returns per unit of risk. Laxmi Organic Industries is currently generating about -0.05 per unit of risk. If you would invest  4,187,865  in NIFTY SUMER DURABLES on October 6, 2024 and sell it today you would earn a total of  134,370  from holding NIFTY SUMER DURABLES or generate 3.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

NIFTY SUMER DURABLES  vs.  Laxmi Organic Industries

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-50510
JavaScript chart by amCharts 3.21.15NIFCODU LXCHEM
       Timeline  

NIFTY SUMER and Laxmi Organic Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.27-2.45-1.63-0.810.00.821.662.513.354.2 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15NIFCODU LXCHEM
       Returns  

Pair Trading with NIFTY SUMER and Laxmi Organic

The main advantage of trading using opposite NIFTY SUMER and Laxmi Organic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIFTY SUMER position performs unexpectedly, Laxmi 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 Laxmi Organic will offset losses from the drop in Laxmi Organic's long position.
The idea behind NIFTY SUMER DURABLES and Laxmi 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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