Correlation Between Lakshmi Finance and GTL
Can any of the company-specific risk be diversified away by investing in both Lakshmi Finance and GTL 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 Finance and GTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lakshmi Finance Industrial and GTL Limited, you can compare the effects of market volatilities on Lakshmi Finance and GTL 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 Finance with a short position of GTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lakshmi Finance and GTL.
Diversification Opportunities for Lakshmi Finance and GTL
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lakshmi and GTL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial and GTL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GTL Limited and Lakshmi Finance 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 Finance Industrial are associated (or correlated) with GTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GTL Limited has no effect on the direction of Lakshmi Finance i.e., Lakshmi Finance and GTL go up and down completely randomly.
Pair Corralation between Lakshmi Finance and GTL
Assuming the 90 days trading horizon Lakshmi Finance Industrial is expected to generate 1.01 times more return on investment than GTL. However, Lakshmi Finance is 1.01 times more volatile than GTL Limited. It trades about -0.1 of its potential returns per unit of risk. GTL Limited is currently generating about -0.22 per unit of risk. If you would invest 23,300 in Lakshmi Finance Industrial on October 20, 2024 and sell it today you would lose (1,404) from holding Lakshmi Finance Industrial or give up 6.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Lakshmi Finance Industrial vs. GTL Limited
Performance |
| Timeline |
| Lakshmi Finance Indu |
| GTL Limited |
Lakshmi Finance and GTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lakshmi Finance and GTL
The main advantage of trading using opposite Lakshmi Finance and GTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakshmi Finance position performs unexpectedly, GTL 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 GTL will offset losses from the drop in GTL's long position.| Lakshmi Finance vs. Indian Metals Ferro | Lakshmi Finance vs. Reliance Communications Limited | Lakshmi Finance vs. Tata Communications Limited | Lakshmi Finance vs. One 97 Communications |
| GTL vs. Reliance Industries Limited | GTL vs. HDFC Bank Limited | GTL vs. Kingfa Science Technology | GTL vs. Rico Auto Industries |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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