Correlation Between Lakshmi Precision and Ausom Enterprise

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

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

Diversification Opportunities for Lakshmi Precision and Ausom Enterprise

0.26

Correlation Coefficient

Lakshmi Precision  Ausom Enterprise

Modest diversification

The 3 months correlation between Lakshmi and Ausom is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Precision Screws and Ausom Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ausom Enterprise and Lakshmi Precision 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 Lakshmi Precision Screws are associated (or correlated) with Ausom Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ausom Enterprise has no effect on the direction of Lakshmi Precision i.e., Lakshmi Precision and Ausom Enterprise go up and down completely randomly.

Pair Corralation between Lakshmi Precision and Ausom Enterprise

Assuming the 90 days trading horizon Lakshmi Precision is expected to generate 2.59 times less return on investment than Ausom Enterprise. But when comparing it to its historical volatility, Lakshmi Precision Screws is 1.67 times less risky than Ausom Enterprise. It trades about 0.04 of its potential returns per unit of risk. Ausom Enterprise Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,599  in Ausom Enterprise Limited on September 2, 2024 and sell it today you would earn a total of  1,078  from holding Ausom Enterprise Limited or generate 11.23% return on investment over 90 days.

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

Lakshmi Precision Screws  vs.  Ausom Enterprise Limited

Lakshmi Precision Screws

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lakshmi Precision Screws are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Lakshmi Precision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ausom Enterprise

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ausom Enterprise Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Ausom Enterprise displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lakshmi Precision and Ausom Enterprise

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

The idea behind Lakshmi Precision Screws and Ausom Enterprise 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.

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 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.