Correlation Between Lotes and Episil Precision

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

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

Diversification Opportunities for Lotes and Episil Precision

-0.47

Correlation Coefficient

Lotes  Episil Precision

Very good diversification

The 3 months correlation between Lotes and Episil is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Episil Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episil Precision 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 Episil Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episil Precision has no effect on the direction of Lotes i.e., Lotes and Episil Precision go up and down completely randomly.

Pair Corralation between Lotes and Episil Precision

Assuming the 90 days trading horizon Lotes Co is expected to generate 1.28 times more return on investment than Episil Precision. However, Lotes is 1.28 times more volatile than Episil Precision. It trades about 0.08 of its potential returns per unit of risk. Episil Precision is currently generating about -0.04 per unit of risk. If you would invest  73,160  in Lotes Co on October 22, 2024 and sell it today you would earn a total of  108,340  from holding Lotes Co or generate 148.09% return on investment over 90 days.

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

Lotes Co  vs.  Episil Precision

Lotes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Episil Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Episil Precision 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lotes and Episil Precision

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

The idea behind Lotes Co and Episil Precision 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.