Correlation Between Lotus Pharmaceutical and Panion BF

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

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

Diversification Opportunities for Lotus Pharmaceutical and Panion BF

0.5

Correlation Coefficient

Lotus Pharmaceutical  Panion BF

Very weak diversification

The 3 months correlation between Lotus and Panion is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Pharmaceutical Co and Panion BF Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panion BF Biotech and Lotus Pharmaceutical 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 Lotus Pharmaceutical Co are associated (or correlated) with Panion BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panion BF Biotech has no effect on the direction of Lotus Pharmaceutical i.e., Lotus Pharmaceutical and Panion BF go up and down completely randomly.

Pair Corralation between Lotus Pharmaceutical and Panion BF

Assuming the 90 days trading horizon Lotus Pharmaceutical Co is expected to generate 1.28 times more return on investment than Panion BF. However, Lotus Pharmaceutical is 1.28 times more volatile than Panion BF Biotech. It trades about -0.02 of its potential returns per unit of risk. Panion BF Biotech is currently generating about -0.05 per unit of risk. If you would invest  28,700  in Lotus Pharmaceutical Co on September 14, 2024 and sell it today you would lose (2,600) from holding Lotus Pharmaceutical Co or give up 9.06% of portfolio value over 90 days.

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

Lotus Pharmaceutical Co  vs.  Panion BF Biotech

Lotus Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lotus Pharmaceutical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Panion BF Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Panion BF Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Panion BF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lotus Pharmaceutical and Panion BF

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

The idea behind Lotus Pharmaceutical Co and Panion BF Biotech 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.

Check out your portfolio center.

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.