Correlation Between IOL Chemicals and Lemon Tree

Can any of the company-specific risk be diversified away by investing in both IOL Chemicals and Lemon Tree 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 IOL Chemicals and Lemon Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IOL Chemicals and and Lemon Tree Hotels, you can compare the effects of market volatilities on IOL Chemicals and Lemon Tree 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 IOL Chemicals with a short position of Lemon Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of IOL Chemicals and Lemon Tree.

Diversification Opportunities for IOL Chemicals and Lemon Tree

0.32

Correlation Coefficient

IOL Chemicals  Lemon Tree

Weak diversification

The 3 months correlation between IOL and Lemon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding IOL Chemicals and and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels and IOL Chemicals 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 IOL Chemicals and are associated (or correlated) with Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of IOL Chemicals i.e., IOL Chemicals and Lemon Tree go up and down completely randomly.

Pair Corralation between IOL Chemicals and Lemon Tree

Assuming the 90 days trading horizon IOL Chemicals and is expected to generate 1.42 times more return on investment than Lemon Tree. However, IOL Chemicals is 1.42 times more volatile than Lemon Tree Hotels. It trades about 0.2 of its potential returns per unit of risk. Lemon Tree Hotels is currently generating about 0.07 per unit of risk. If you would invest  6,889  in IOL Chemicals and on April 24, 2025 and sell it today you would earn a total of  2,751  from holding IOL Chemicals and or generate 39.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

IOL Chemicals and  vs.  Lemon Tree Hotels

IOL Chemicals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IOL Chemicals and are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, IOL Chemicals displayed solid returns over the last few months and may actually be approaching a breakup point.

Lemon Tree Hotels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Lemon Tree may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IOL Chemicals and Lemon Tree

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

The idea behind IOL Chemicals and and Lemon Tree Hotels 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.