Correlation Between Xiandai Investment and Lotus Health

Can any of the company-specific risk be diversified away by investing in both Xiandai Investment and Lotus Health 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 Xiandai Investment and Lotus Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xiandai Investment Co and Lotus Health Group, you can compare the effects of market volatilities on Xiandai Investment and Lotus Health 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 Xiandai Investment with a short position of Lotus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiandai Investment and Lotus Health.

Diversification Opportunities for Xiandai Investment and Lotus Health

0.67

Correlation Coefficient

Xiandai Investment  Lotus Health

Poor diversification

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

Pair Corralation between Xiandai Investment and Lotus Health

Assuming the 90 days trading horizon Xiandai Investment Co is expected to under-perform the Lotus Health. But the stock apears to be less risky and, when comparing its historical volatility, Xiandai Investment Co is 3.0 times less risky than Lotus Health. The stock trades about -0.31 of its potential returns per unit of risk. The Lotus Health Group is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  568.00  in Lotus Health Group on October 9, 2024 and sell it today you would lose (64.00) from holding Lotus Health Group or give up 11.27% of portfolio value over 90 days.

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

Xiandai Investment Co  vs.  Lotus Health Group

Xiandai Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiandai Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lotus Health Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lotus Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xiandai Investment and Lotus Health

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

The idea behind Xiandai Investment Co and Lotus Health Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.