Correlation Between Speciality Restaurants and Lakshmi Finance

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

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

Diversification Opportunities for Speciality Restaurants and Lakshmi Finance

0.62

Correlation Coefficient

Speciality Restaurants  Lakshmi Finance

Poor diversification

The 3 months correlation between Speciality and Lakshmi is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited 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 Speciality Restaurants 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 Speciality Restaurants Limited 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 Speciality Restaurants i.e., Speciality Restaurants and Lakshmi Finance go up and down completely randomly.

Pair Corralation between Speciality Restaurants and Lakshmi Finance

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the Lakshmi Finance. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.09 times less risky than Lakshmi Finance. The stock trades about -0.33 of its potential returns per unit of risk. The Lakshmi Finance Industrial is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  23,700  in Lakshmi Finance Industrial on October 11, 2024 and sell it today you would earn a total of  1,192  from holding Lakshmi Finance Industrial or generate 5.03% return on investment over 90 days.

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

Speciality Restaurants Limited  vs.  Lakshmi Finance Industrial

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Speciality Restaurants and Lakshmi Finance

The main advantage of trading using opposite Speciality Restaurants and Lakshmi Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Speciality Restaurants 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 Speciality Restaurants Limited 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.