Correlation Between Lemon Tree and Compucom Software

Can any of the company-specific risk be diversified away by investing in both Lemon Tree and Compucom Software 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 Compucom Software 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 Compucom Software Limited, you can compare the effects of market volatilities on Lemon Tree and Compucom Software 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 Compucom Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemon Tree and Compucom Software.

Diversification Opportunities for Lemon Tree and Compucom Software

-0.67

Correlation Coefficient

Lemon Tree  Compucom Software

Excellent diversification

The 3 months correlation between Lemon and Compucom is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lemon Tree Hotels and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software 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 Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Lemon Tree i.e., Lemon Tree and Compucom Software go up and down completely randomly.

Pair Corralation between Lemon Tree and Compucom Software

Assuming the 90 days trading horizon Lemon Tree Hotels is expected to generate 1.94 times more return on investment than Compucom Software. However, Lemon Tree is 1.94 times more volatile than Compucom Software Limited. It trades about 0.28 of its potential returns per unit of risk. Compucom Software Limited is currently generating about -0.03 per unit of risk. If you would invest  15,298  in Lemon Tree Hotels on June 17, 2025 and sell it today you would earn a total of  2,239  from holding Lemon Tree Hotels or generate 14.64% return on investment over 90 days.

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

Lemon Tree Hotels  vs.  Compucom Software Limited

Lemon Tree Hotels

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Compucom Software

Risk-Adjusted Performance

Weakest

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compucom Software is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lemon Tree and Compucom Software

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

The idea behind Lemon Tree Hotels and Compucom Software 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.