Correlation Between Sapphire Foods and Lakshmi Finance

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

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

Diversification Opportunities for Sapphire Foods and Lakshmi Finance

0.57

Correlation Coefficient

Sapphire Foods  Lakshmi Finance

Very weak diversification

The 3 months correlation between Sapphire and Lakshmi is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India 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 Sapphire 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 Sapphire Foods India 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 Sapphire Foods i.e., Sapphire Foods and Lakshmi Finance go up and down completely randomly.

Pair Corralation between Sapphire Foods and Lakshmi Finance

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 0.82 times more return on investment than Lakshmi Finance. However, Sapphire Foods India is 1.21 times less risky than Lakshmi Finance. It trades about -0.02 of its potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about -0.12 per unit of risk. If you would invest  32,125  in Sapphire Foods India on December 26, 2024 and sell it today you would lose (2,065) from holding Sapphire Foods India or give up 6.43% of portfolio value over 90 days.

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

Sapphire Foods India  vs.  Lakshmi Finance Industrial

Sapphire Foods India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Lakshmi Finance Indu

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sapphire Foods and Lakshmi Finance

The main advantage of trading using opposite Sapphire Foods and Lakshmi Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapphire Foods 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 Sapphire Foods India 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..