Correlation Between Lemon Tree and Aster DM

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

By analyzing existing cross correlation between Lemon Tree Hotels and Aster DM Healthcare, you can compare the effects of market volatilities on Lemon Tree and Aster DM 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 Aster DM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemon Tree and Aster DM.

Diversification Opportunities for Lemon Tree and Aster DM

0.25

Correlation Coefficient

Lemon Tree  Aster DM

Modest diversification

The 3 months correlation between Lemon and Aster is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Aster DM Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aster DM Healthcare 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 Aster DM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aster DM Healthcare has no effect on the direction of Lemon Tree i.e., Lemon Tree and Aster DM go up and down completely randomly.

Pair Corralation between Lemon Tree and Aster DM

Assuming the 90 days trading horizon Lemon Tree is expected to generate 2.39 times less return on investment than Aster DM. But when comparing it to its historical volatility, Lemon Tree Hotels is 1.08 times less risky than Aster DM. It trades about 0.06 of its potential returns per unit of risk. Aster DM Healthcare is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  50,585  in Aster DM Healthcare on April 23, 2025 and sell it today you would earn a total of  9,265  from holding Aster DM Healthcare or generate 18.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Lemon Tree Hotels  vs.  Aster DM Healthcare

Lemon Tree Hotels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Lemon Tree may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Aster DM Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lemon Tree and Aster DM

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

The idea behind Lemon Tree Hotels and Aster DM Healthcare 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.