Correlation Between Lotes and Primax Electronics

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

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

Diversification Opportunities for Lotes and Primax Electronics

-0.52

Correlation Coefficient

Lotes  Primax Electronics

Excellent diversification

The 3 months correlation between Lotes and Primax is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Primax Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primax Electronics 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 Primax Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primax Electronics has no effect on the direction of Lotes i.e., Lotes and Primax Electronics go up and down completely randomly.

Pair Corralation between Lotes and Primax Electronics

Assuming the 90 days trading horizon Lotes Co is expected to under-perform the Primax Electronics. In addition to that, Lotes is 1.63 times more volatile than Primax Electronics. It trades about -0.13 of its total potential returns per unit of risk. Primax Electronics is currently generating about 0.12 per unit of volatility. If you would invest  7,680  in Primax Electronics on December 27, 2024 and sell it today you would earn a total of  830.00  from holding Primax Electronics or generate 10.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Lotes Co  vs.  Primax Electronics

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.

Primax Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primax Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Primax Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lotes and Primax Electronics

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

The idea behind Lotes Co and Primax 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.