Correlation Between POWERGRID Infrastructure and Larsen Toubro
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By analyzing existing cross correlation between POWERGRID Infrastructure Investment and Larsen Toubro Limited, you can compare the effects of market volatilities on POWERGRID Infrastructure and Larsen Toubro 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 POWERGRID Infrastructure with a short position of Larsen Toubro. Check out your portfolio center. Please also check ongoing floating volatility patterns of POWERGRID Infrastructure and Larsen Toubro.
Diversification Opportunities for POWERGRID Infrastructure and Larsen Toubro
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between POWERGRID and Larsen is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding POWERGRID Infrastructure Inves and Larsen Toubro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larsen Toubro Limited and POWERGRID Infrastructure 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 POWERGRID Infrastructure Investment are associated (or correlated) with Larsen Toubro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larsen Toubro Limited has no effect on the direction of POWERGRID Infrastructure i.e., POWERGRID Infrastructure and Larsen Toubro go up and down completely randomly.
Pair Corralation between POWERGRID Infrastructure and Larsen Toubro
Assuming the 90 days trading horizon POWERGRID Infrastructure Investment is expected to under-perform the Larsen Toubro. But the stock apears to be less risky and, when comparing its historical volatility, POWERGRID Infrastructure Investment is 2.69 times less risky than Larsen Toubro. The stock trades about -0.07 of its potential returns per unit of risk. The Larsen Toubro Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 306,471 in Larsen Toubro Limited on September 14, 2024 and sell it today you would earn a total of 79,519 from holding Larsen Toubro Limited or generate 25.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POWERGRID Infrastructure Inves vs. Larsen Toubro Limited
Performance |
| Timeline |
| POWERGRID Infrastructure |
| Larsen Toubro Limited |
POWERGRID Infrastructure and Larsen Toubro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POWERGRID Infrastructure and Larsen Toubro
The main advantage of trading using opposite POWERGRID Infrastructure and Larsen Toubro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POWERGRID Infrastructure position performs unexpectedly, Larsen Toubro 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 Larsen Toubro will offset losses from the drop in Larsen Toubro's long position.The idea behind POWERGRID Infrastructure Investment and Larsen Toubro 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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