Correlation Between Lotes and ITEQ Corp

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

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

Diversification Opportunities for Lotes and ITEQ Corp

0.61

Correlation Coefficient

Lotes  ITEQ Corp

Poor diversification

The 3 months correlation between Lotes and ITEQ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp 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 ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of Lotes i.e., Lotes and ITEQ Corp go up and down completely randomly.

Pair Corralation between Lotes and ITEQ Corp

Assuming the 90 days trading horizon Lotes Co is expected to under-perform the ITEQ Corp. In addition to that, Lotes is 1.29 times more volatile than ITEQ Corp. It trades about -0.16 of its total potential returns per unit of risk. ITEQ Corp is currently generating about -0.11 per unit of volatility. If you would invest  7,950  in ITEQ Corp on December 28, 2024 and sell it today you would lose (1,090) from holding ITEQ Corp or give up 13.71% 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.  ITEQ Corp

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.

ITEQ Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITEQ Corp 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.

Pair Trading with Lotes and ITEQ Corp

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

The idea behind Lotes Co and ITEQ Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.