Correlation Between Blue Sail and Lotus Health

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

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

Diversification Opportunities for Blue Sail and Lotus Health

0.92

Correlation Coefficient

Blue Sail  Lotus Health

Almost no diversification

The 3 months correlation between Blue and Lotus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical 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 Blue Sail 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 Blue Sail Medical 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 Blue Sail i.e., Blue Sail and Lotus Health go up and down completely randomly.

Pair Corralation between Blue Sail and Lotus Health

Assuming the 90 days trading horizon Blue Sail Medical is expected to under-perform the Lotus Health. But the stock apears to be less risky and, when comparing its historical volatility, Blue Sail Medical is 1.69 times less risky than Lotus Health. The stock trades about -0.05 of its potential returns per unit of risk. The Lotus Health Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  494.00  in Lotus Health Group on September 21, 2024 and sell it today you would earn a total of  35.00  from holding Lotus Health Group or generate 7.09% return on investment over 90 days.

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

Blue Sail Medical  vs.  Lotus Health Group

Blue Sail Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotus Health Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 20 (%) 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 Blue Sail and Lotus Health

The main advantage of trading using opposite Blue Sail and Lotus Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Sail 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 Blue Sail Medical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.