Correlation Between Shyam Telecom and LT Foods

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

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

Diversification Opportunities for Shyam Telecom and LT Foods

-0.4

Correlation Coefficient

Shyam Telecom  LT Foods

Very good diversification

The 3 months correlation between Shyam and LTFOODS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Telecom Limited and LT Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LT Foods Limited and Shyam Telecom 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 Shyam Telecom Limited are associated (or correlated) with LT Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LT Foods Limited has no effect on the direction of Shyam Telecom i.e., Shyam Telecom and LT Foods go up and down completely randomly.

Pair Corralation between Shyam Telecom and LT Foods

Assuming the 90 days trading horizon Shyam Telecom is expected to generate 1.72 times less return on investment than LT Foods. In addition to that, Shyam Telecom is 1.17 times more volatile than LT Foods Limited. It trades about 0.06 of its total potential returns per unit of risk. LT Foods Limited is currently generating about 0.13 per unit of volatility. If you would invest  16,096  in LT Foods Limited on September 26, 2024 and sell it today you would earn a total of  24,274  from holding LT Foods Limited or generate 150.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	58.64%
Values	Daily Returns

Shyam Telecom Limited  vs.  LT Foods Limited

Shyam Telecom Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Telecom Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Shyam Telecom exhibited solid returns over the last few months and may actually be approaching a breakup point.

LT Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LT Foods is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Shyam Telecom and LT Foods

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

The idea behind Shyam Telecom Limited and LT Foods Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.