Correlation Between Power Finance and Lakshmi Finance

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

By analyzing existing cross correlation between Power Finance and Lakshmi Finance Industrial, you can compare the effects of market volatilities on Power Finance and Lakshmi Finance 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 Power Finance with a short position of Lakshmi Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and Lakshmi Finance.

Diversification Opportunities for Power Finance and Lakshmi Finance

-0.11

Correlation Coefficient

Power Finance  Lakshmi Finance

Good diversification

The 3 months correlation between Power and Lakshmi is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and Lakshmi Finance Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Finance Indu and Power Finance 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 Power Finance are associated (or correlated) with Lakshmi Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Finance Indu has no effect on the direction of Power Finance i.e., Power Finance and Lakshmi Finance go up and down completely randomly.

Pair Corralation between Power Finance and Lakshmi Finance

Assuming the 90 days trading horizon Power Finance is expected to generate 1.34 times more return on investment than Lakshmi Finance. However, Power Finance is 1.34 times more volatile than Lakshmi Finance Industrial. It trades about 0.02 of its potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about -0.06 per unit of risk. If you would invest  46,150  in Power Finance on October 6, 2024 and sell it today you would earn a total of  330.00  from holding Power Finance or generate 0.72% return on investment over 90 days.

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

Power Finance  vs.  Lakshmi Finance Industrial

Power Finance

Risk-Adjusted Performance

4 of 100

Insignificant

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

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Power Finance and Lakshmi Finance

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

The idea behind Power Finance and Lakshmi Finance Industrial 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.