Correlation Between Sarthak Metals and Lemon Tree

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

By analyzing existing cross correlation between Sarthak Metals Limited and Lemon Tree Hotels, you can compare the effects of market volatilities on Sarthak Metals and Lemon Tree 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 Sarthak Metals with a short position of Lemon Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarthak Metals and Lemon Tree.

Diversification Opportunities for Sarthak Metals and Lemon Tree

-0.42

Correlation Coefficient

Sarthak Metals  Lemon Tree

Very good diversification

The 3 months correlation between Sarthak and Lemon is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Lemon Tree go up and down completely randomly.

Pair Corralation between Sarthak Metals and Lemon Tree

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the Lemon Tree. In addition to that, Sarthak Metals is 1.44 times more volatile than Lemon Tree Hotels. It trades about 0.0 of its total potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.53 per unit of volatility. If you would invest  13,097  in Lemon Tree Hotels on October 4, 2024 and sell it today you would earn a total of  2,199  from holding Lemon Tree Hotels or generate 16.79% return on investment over 90 days.

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

Sarthak Metals Limited  vs.  Lemon Tree Hotels

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lemon Tree Hotels

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarthak Metals and Lemon Tree

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

The idea behind Sarthak Metals Limited and Lemon Tree Hotels 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.