Correlation Between Sdiptech and Lime Technologies

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

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

Diversification Opportunities for Sdiptech and Lime Technologies

0.25

Correlation Coefficient

Sdiptech  Lime Technologies

Modest diversification

The 3 months correlation between Sdiptech and Lime is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sdiptech AB and Lime Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lime Technologies and Sdiptech 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 Sdiptech AB are associated (or correlated) with Lime Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lime Technologies has no effect on the direction of Sdiptech i.e., Sdiptech and Lime Technologies go up and down completely randomly.

Pair Corralation between Sdiptech and Lime Technologies

Assuming the 90 days trading horizon Sdiptech is expected to generate 14.64 times less return on investment than Lime Technologies. But when comparing it to its historical volatility, Sdiptech AB is 2.97 times less risky than Lime Technologies. It trades about 0.03 of its potential returns per unit of risk. Lime Technologies AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  30,940  in Lime Technologies AB on September 3, 2024 and sell it today you would earn a total of  6,410  from holding Lime Technologies AB or generate 20.72% return on investment over 90 days.

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

Sdiptech AB  vs.  Lime Technologies AB

Sdiptech AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sdiptech AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Sdiptech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lime Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lime Technologies AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lime Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sdiptech and Lime Technologies

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

The idea behind Sdiptech AB and Lime Technologies AB 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.