Correlation Between Indo Borax and LT Technology

Can any of the company-specific risk be diversified away by investing in both Indo Borax and LT Technology 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 Indo Borax and LT Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Borax Chemicals and LT Technology Services, you can compare the effects of market volatilities on Indo Borax and LT Technology 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 Indo Borax with a short position of LT Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Borax and LT Technology.

Diversification Opportunities for Indo Borax and LT Technology

0.62

Correlation Coefficient

Indo Borax  LT Technology

Poor diversification

The 3 months correlation between Indo and LTTS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and LT Technology Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LT Technology Services and Indo Borax 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 Indo Borax Chemicals are associated (or correlated) with LT Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LT Technology Services has no effect on the direction of Indo Borax i.e., Indo Borax and LT Technology go up and down completely randomly.

Pair Corralation between Indo Borax and LT Technology

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to generate 2.23 times more return on investment than LT Technology. However, Indo Borax is 2.23 times more volatile than LT Technology Services. It trades about -0.02 of its potential returns per unit of risk. LT Technology Services is currently generating about -0.06 per unit of risk. If you would invest  21,755  in Indo Borax Chemicals on September 4, 2024 and sell it today you would lose (1,999) from holding Indo Borax Chemicals or give up 9.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Indo Borax Chemicals  vs.  LT Technology Services

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

LT Technology Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LT Technology Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with Indo Borax and LT Technology

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

The idea behind Indo Borax Chemicals and LT Technology Services 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.