Correlation Between Garuda Construction and Lemon Tree

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

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

Diversification Opportunities for Garuda Construction and Lemon Tree

-0.01

Correlation Coefficient

Garuda Construction  Lemon Tree

Good diversification

The 3 months correlation between Garuda and Lemon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin 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 Garuda Construction 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 Garuda Construction Engineering 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 Garuda Construction i.e., Garuda Construction and Lemon Tree go up and down completely randomly.

Pair Corralation between Garuda Construction and Lemon Tree

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to under-perform the Lemon Tree. In addition to that, Garuda Construction is 2.54 times more volatile than Lemon Tree Hotels. It trades about -0.11 of its total potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.0 per unit of volatility. If you would invest  13,252  in Lemon Tree Hotels on August 31, 2024 and sell it today you would lose (193.00) from holding Lemon Tree Hotels or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.79%
Values	Daily Returns

Garuda Construction Engineerin  vs.  Lemon Tree Hotels

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lemon Tree Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lemon Tree Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Lemon Tree is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Garuda Construction and Lemon Tree

The main advantage of trading using opposite Garuda Construction and Lemon Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garuda Construction 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 Garuda Construction Engineering 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.