Correlation Between STEEL EXCHANGE and Lakshmi Finance

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

By analyzing existing cross correlation between STEEL EXCHANGE INDIA and Lakshmi Finance Industrial, you can compare the effects of market volatilities on STEEL EXCHANGE and Lakshmi Finance 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 STEEL EXCHANGE with a short position of Lakshmi Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL EXCHANGE and Lakshmi Finance.

Diversification Opportunities for STEEL EXCHANGE and Lakshmi Finance

0.64

Correlation Coefficient

STEEL EXCHANGE  Lakshmi Finance

Poor diversification

The 3 months correlation between STEEL and Lakshmi is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Lakshmi Finance Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Finance Indu and STEEL EXCHANGE 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 STEEL EXCHANGE INDIA are associated (or correlated) with Lakshmi Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Finance Indu has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Lakshmi Finance go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Lakshmi Finance

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to generate 0.65 times more return on investment than Lakshmi Finance. However, STEEL EXCHANGE INDIA is 1.54 times less risky than Lakshmi Finance. It trades about -0.15 of its potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about -0.13 per unit of risk. If you would invest  1,283  in STEEL EXCHANGE INDIA on September 28, 2024 and sell it today you would lose (238.00) from holding STEEL EXCHANGE INDIA or give up 18.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

STEEL EXCHANGE INDIA  vs.  Lakshmi Finance Industrial

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STEEL EXCHANGE and Lakshmi Finance

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

The idea behind STEEL EXCHANGE INDIA and Lakshmi Finance Industrial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.