Correlation Between Sarthak Metals and LT Foods

Can any of the company-specific risk be diversified away by investing in both Sarthak Metals 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 Sarthak Metals and LT Foods 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 LT Foods Limited, you can compare the effects of market volatilities on Sarthak Metals 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 Sarthak Metals with a short position of LT Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarthak Metals and LT Foods.

Diversification Opportunities for Sarthak Metals and LT Foods

0.21

Correlation Coefficient

Sarthak Metals  LT Foods

Modest diversification

The 3 months correlation between Sarthak and LTFOODS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals 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 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 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 Sarthak Metals i.e., Sarthak Metals and LT Foods go up and down completely randomly.

Pair Corralation between Sarthak Metals and LT Foods

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the LT Foods. In addition to that, Sarthak Metals is 1.24 times more volatile than LT Foods Limited. It trades about -0.01 of its total potential returns per unit of risk. LT Foods Limited is currently generating about 0.06 per unit of volatility. If you would invest  39,590  in LT Foods Limited on October 8, 2024 and sell it today you would earn a total of  3,525  from holding LT Foods Limited or generate 8.9% return on investment over 90 days.

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

Sarthak Metals Limited  vs.  LT Foods Limited

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 comparatively stable basic indicators, Sarthak Metals is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

LT Foods Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LT Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sarthak Metals and LT Foods

The main advantage of trading using opposite Sarthak Metals and LT Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarthak Metals 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 Sarthak Metals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.