Correlation Between Lemon Tree and Natco Pharma
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By analyzing existing cross correlation between Lemon Tree Hotels and Natco Pharma Limited, you can compare the effects of market volatilities on Lemon Tree and Natco Pharma 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 Lemon Tree with a short position of Natco Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemon Tree and Natco Pharma.
Diversification Opportunities for Lemon Tree and Natco Pharma
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lemon and Natco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Natco Pharma Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natco Pharma Limited and Lemon Tree 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 Lemon Tree Hotels are associated (or correlated) with Natco Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natco Pharma Limited has no effect on the direction of Lemon Tree i.e., Lemon Tree and Natco Pharma go up and down completely randomly.
Pair Corralation between Lemon Tree and Natco Pharma
Assuming the 90 days trading horizon Lemon Tree is expected to generate 1.48 times less return on investment than Natco Pharma. In addition to that, Lemon Tree is 1.11 times more volatile than Natco Pharma Limited. It trades about 0.07 of its total potential returns per unit of risk. Natco Pharma Limited is currently generating about 0.12 per unit of volatility. If you would invest 54,262 in Natco Pharma Limited on September 14, 2024 and sell it today you would earn a total of 92,788 from holding Natco Pharma Limited or generate 171.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lemon Tree Hotels vs. Natco Pharma Limited
Performance |
| Timeline |
| Lemon Tree Hotels |
| Natco Pharma Limited |
Lemon Tree and Natco Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lemon Tree and Natco Pharma
The main advantage of trading using opposite Lemon Tree and Natco Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lemon Tree position performs unexpectedly, Natco Pharma 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 Natco Pharma will offset losses from the drop in Natco Pharma's long position.| Lemon Tree vs. Indian Railway Finance | Lemon Tree vs. Cholamandalam Financial Holdings | Lemon Tree vs. Reliance Industries Limited | Lemon Tree vs. Tata Consultancy Services |
| Natco Pharma vs. Sonata Software Limited | Natco Pharma vs. Som Distilleries Breweries | Natco Pharma vs. Oriental Hotels Limited | Natco Pharma vs. Lemon Tree Hotels |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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