Correlation Between Gillette India and Le Travenues

Can any of the company-specific risk be diversified away by investing in both Gillette India and Le Travenues 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 Gillette India and Le Travenues into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gillette India Limited and Le Travenues Technology, you can compare the effects of market volatilities on Gillette India and Le Travenues 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 Gillette India with a short position of Le Travenues. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gillette India and Le Travenues.

Diversification Opportunities for Gillette India and Le Travenues

-0.14

Correlation Coefficient

Gillette India  Le Travenues

Good diversification

The 3 months correlation between Gillette and IXIGO is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gillette India Limited and Le Travenues Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Le Travenues Technology and Gillette India 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 Gillette India Limited are associated (or correlated) with Le Travenues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Le Travenues Technology has no effect on the direction of Gillette India i.e., Gillette India and Le Travenues go up and down completely randomly.

Pair Corralation between Gillette India and Le Travenues

Assuming the 90 days trading horizon Gillette India is expected to generate 2.14 times less return on investment than Le Travenues. But when comparing it to its historical volatility, Gillette India Limited is 1.05 times less risky than Le Travenues. It trades about 0.05 of its potential returns per unit of risk. Le Travenues Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,949  in Le Travenues Technology on September 23, 2024 and sell it today you would earn a total of  2,595  from holding Le Travenues Technology or generate 18.6% return on investment over 90 days.

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

Gillette India Limited  vs.  Le Travenues Technology

Gillette India

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gillette India Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gillette India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Le Travenues Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Le Travenues Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward indicators, Le Travenues displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gillette India and Le Travenues

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

The idea behind Gillette India Limited and Le Travenues Technology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.