Correlation Between Lotes and Phison Electronics

Can any of the company-specific risk be diversified away by investing in both Lotes and Phison 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 Phison 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 Phison Electronics, you can compare the effects of market volatilities on Lotes and Phison 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 Phison Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and Phison Electronics.

Diversification Opportunities for Lotes and Phison Electronics

-0.72

Correlation Coefficient

Lotes  Phison Electronics

Pay attention - limited upside

The 3 months correlation between Lotes and Phison is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Phison Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phison 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 Phison Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phison Electronics has no effect on the direction of Lotes i.e., Lotes and Phison Electronics go up and down completely randomly.

Pair Corralation between Lotes and Phison Electronics

Assuming the 90 days trading horizon Lotes Co is expected to under-perform the Phison Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Lotes Co is 1.01 times less risky than Phison Electronics. The stock trades about -0.14 of its potential returns per unit of risk. The Phison Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  50,857  in Phison Electronics on December 28, 2024 and sell it today you would earn a total of  5,943  from holding Phison Electronics or generate 11.69% return on investment over 90 days.

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

Lotes Co  vs.  Phison 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.

Phison Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phison Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Phison Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotes and Phison Electronics

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

The idea behind Lotes Co and Phison 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.