Correlation Between Lotes and Alchip Technologies

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

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

Diversification Opportunities for Lotes and Alchip Technologies

0.67

Correlation Coefficient

Lotes  Alchip Technologies

Poor diversification

The 3 months correlation between Lotes and Alchip is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies 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 Alchip Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchip Technologies has no effect on the direction of Lotes i.e., Lotes and Alchip Technologies go up and down completely randomly.

Pair Corralation between Lotes and Alchip Technologies

Assuming the 90 days trading horizon Lotes Co is expected to under-perform the Alchip Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Lotes Co is 1.27 times less risky than Alchip Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The Alchip Technologies is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  321,500  in Alchip Technologies on December 28, 2024 and sell it today you would lose (36,500) from holding Alchip Technologies or give up 11.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lotes Co  vs.  Alchip Technologies

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 weak 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.

Alchip Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alchip Technologies 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 Alchip Technologies

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

The idea behind Lotes Co and Alchip Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.