Correlation Between Repco Home and Lemon Tree

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

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

Diversification Opportunities for Repco Home and Lemon Tree

0.47

Correlation Coefficient

Repco Home  Lemon Tree

Very weak diversification

The 3 months correlation between Repco and Lemon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance 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 Repco Home 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 Repco Home Finance 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 Repco Home i.e., Repco Home and Lemon Tree go up and down completely randomly.

Pair Corralation between Repco Home and Lemon Tree

Assuming the 90 days trading horizon Repco Home Finance is expected to generate 0.99 times more return on investment than Lemon Tree. However, Repco Home Finance is 1.01 times less risky than Lemon Tree. It trades about 0.08 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  39,705  in Repco Home Finance on April 24, 2025 and sell it today you would earn a total of  3,735  from holding Repco Home Finance or generate 9.41% return on investment over 90 days.

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

Repco Home Finance  vs.  Lemon Tree Hotels

Repco Home Finance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Repco Home Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Repco Home may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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 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 Repco Home and Lemon Tree

The main advantage of trading using opposite Repco Home and Lemon Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repco Home 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 Repco Home Finance 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.