Correlation Between EMemory Technology and Lotes

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

By analyzing existing cross correlation between eMemory Technology and Lotes Co, you can compare the effects of market volatilities on EMemory Technology and Lotes 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 EMemory Technology with a short position of Lotes. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMemory Technology and Lotes.

Diversification Opportunities for EMemory Technology and Lotes

0.71

Correlation Coefficient

EMemory Technology  Lotes

Poor diversification

The 3 months correlation between EMemory and Lotes is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding eMemory Technology and Lotes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotes and EMemory Technology 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 eMemory Technology are associated (or correlated) with Lotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotes has no effect on the direction of EMemory Technology i.e., EMemory Technology and Lotes go up and down completely randomly.

Pair Corralation between EMemory Technology and Lotes

Assuming the 90 days trading horizon eMemory Technology is expected to generate 1.17 times more return on investment than Lotes. However, EMemory Technology is 1.17 times more volatile than Lotes Co. It trades about 0.08 of its potential returns per unit of risk. Lotes Co is currently generating about 0.08 per unit of risk. If you would invest  127,848  in eMemory Technology on September 15, 2024 and sell it today you would earn a total of  199,652  from holding eMemory Technology or generate 156.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

eMemory Technology  vs.  Lotes Co

eMemory Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eMemory Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EMemory Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Lotes

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMemory Technology and Lotes

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

The idea behind eMemory Technology and Lotes Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.