Correlation Between Generic Engineering and Lakshmi Precision

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

By analyzing existing cross correlation between Generic Engineering Construction and Lakshmi Precision Screws, you can compare the effects of market volatilities on Generic Engineering and Lakshmi Precision 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 Generic Engineering with a short position of Lakshmi Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and Lakshmi Precision.

Diversification Opportunities for Generic Engineering and Lakshmi Precision

-0.13

Correlation Coefficient

Generic Engineering  Lakshmi Precision

Good diversification

The 3 months correlation between Generic and Lakshmi is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and Lakshmi Precision Screws in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Precision Screws and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with Lakshmi Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Precision Screws has no effect on the direction of Generic Engineering i.e., Generic Engineering and Lakshmi Precision go up and down completely randomly.

Pair Corralation between Generic Engineering and Lakshmi Precision

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 0.78 times more return on investment than Lakshmi Precision. However, Generic Engineering Construction is 1.28 times less risky than Lakshmi Precision. It trades about 0.05 of its potential returns per unit of risk. Lakshmi Precision Screws is currently generating about -0.31 per unit of risk. If you would invest  3,900  in Generic Engineering Construction on August 31, 2024 and sell it today you would earn a total of  97.00  from holding Generic Engineering Construction or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Generic Engineering Constructi  vs.  Lakshmi Precision Screws

Generic Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generic Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lakshmi Precision Screws

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Precision Screws has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lakshmi Precision is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Generic Engineering and Lakshmi Precision

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

The idea behind Generic Engineering Construction and Lakshmi Precision Screws 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.