Correlation Between Lotes and Chin Poon

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

By analyzing existing cross correlation between Lotes Co and Chin Poon Industrial Co, you can compare the effects of market volatilities on Lotes and Chin Poon 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 Chin Poon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and Chin Poon.

Diversification Opportunities for Lotes and Chin Poon

0.5

Correlation Coefficient

Lotes  Chin Poon

Very weak diversification

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

Pair Corralation between Lotes and Chin Poon

Assuming the 90 days trading horizon Lotes is expected to generate 2.6 times less return on investment than Chin Poon. In addition to that, Lotes is 1.36 times more volatile than Chin Poon Industrial Co. It trades about 0.03 of its total potential returns per unit of risk. Chin Poon Industrial Co is currently generating about 0.1 per unit of volatility. If you would invest  3,630  in Chin Poon Industrial Co on December 5, 2024 and sell it today you would earn a total of  150.00  from holding Chin Poon Industrial Co or generate 4.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Lotes Co  vs.  Chin Poon Industrial Co

Lotes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotes Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chin Poon Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chin Poon Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chin Poon 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 Lotes and Chin Poon

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

The idea behind Lotes Co and Chin Poon Industrial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.