Correlation Between Ravi Kumar and Lemon Tree

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

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

Diversification Opportunities for Ravi Kumar and Lemon Tree

0.75

Correlation Coefficient

Ravi Kumar  Lemon Tree

Poor diversification

The 3 months correlation between Ravi and Lemon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ravi Kumar Distilleries 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 Ravi Kumar 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 Ravi Kumar Distilleries 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 Ravi Kumar i.e., Ravi Kumar and Lemon Tree go up and down completely randomly.

Pair Corralation between Ravi Kumar and Lemon Tree

Assuming the 90 days trading horizon Ravi Kumar Distilleries is expected to generate 1.34 times more return on investment than Lemon Tree. However, Ravi Kumar is 1.34 times more volatile than Lemon Tree Hotels. It trades about 0.04 of its potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.04 per unit of risk. If you would invest  1,970  in Ravi Kumar Distilleries on September 1, 2024 and sell it today you would earn a total of  784.00  from holding Ravi Kumar Distilleries or generate 39.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.96%
Values	Daily Returns

Ravi Kumar Distilleries  vs.  Lemon Tree Hotels

Ravi Kumar Distilleries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ravi Kumar Distilleries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

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 Ravi Kumar and Lemon Tree

The main advantage of trading using opposite Ravi Kumar and Lemon Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ravi Kumar 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 Ravi Kumar Distilleries 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.