Correlation Between Lotes and Coxon Precise

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

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

Diversification Opportunities for Lotes and Coxon Precise

-0.45

Correlation Coefficient

Lotes  Coxon Precise

Very good diversification

The 3 months correlation between Lotes and Coxon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Coxon Precise Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coxon Precise 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 Coxon Precise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coxon Precise Industrial has no effect on the direction of Lotes i.e., Lotes and Coxon Precise go up and down completely randomly.

Pair Corralation between Lotes and Coxon Precise

Assuming the 90 days trading horizon Lotes Co is expected to generate 1.13 times more return on investment than Coxon Precise. However, Lotes is 1.13 times more volatile than Coxon Precise Industrial. It trades about 0.08 of its potential returns per unit of risk. Coxon Precise Industrial is currently generating about 0.05 per unit of risk. If you would invest  79,530  in Lotes Co on September 24, 2024 and sell it today you would earn a total of  107,470  from holding Lotes Co or generate 135.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Lotes Co  vs.  Coxon Precise Industrial

Lotes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 12 (%) 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.

Coxon Precise Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coxon Precise Industrial 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lotes and Coxon Precise

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

The idea behind Lotes Co and Coxon Precise Industrial 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.