Correlation Between Lotes and Orient Semiconductor

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

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

Diversification Opportunities for Lotes and Orient Semiconductor

-0.59

Correlation Coefficient

Lotes  Orient Semiconductor

Excellent diversification

The 3 months correlation between Lotes and Orient is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Orient Semiconductor Electroni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Semiconductor and Lotes 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 Lotes Co are associated (or correlated) with Orient Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Semiconductor has no effect on the direction of Lotes i.e., Lotes and Orient Semiconductor go up and down completely randomly.

Pair Corralation between Lotes and Orient Semiconductor

Assuming the 90 days trading horizon Lotes Co is expected to generate 1.21 times more return on investment than Orient Semiconductor. However, Lotes is 1.21 times more volatile than Orient Semiconductor Electronics. It trades about -0.07 of its potential returns per unit of risk. Orient Semiconductor Electronics is currently generating about -0.21 per unit of risk. If you would invest  193,500  in Lotes Co on October 8, 2024 and sell it today you would lose (6,500) from holding Lotes Co or give up 3.36% of portfolio value over 90 days.

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

Lotes Co  vs.  Orient Semiconductor Electroni

Lotes

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 10 (%) 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.

Orient Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Semiconductor Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lotes and Orient Semiconductor

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

The idea behind Lotes Co and Orient Semiconductor Electronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.