Correlation Between Center Laboratories and Lotus Pharmaceutical

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

By analyzing existing cross correlation between Center Laboratories and Lotus Pharmaceutical Co, you can compare the effects of market volatilities on Center Laboratories and Lotus Pharmaceutical 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 Center Laboratories with a short position of Lotus Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Center Laboratories and Lotus Pharmaceutical.

Diversification Opportunities for Center Laboratories and Lotus Pharmaceutical

0.16

Correlation Coefficient

Center Laboratories  Lotus Pharmaceutical

Average diversification

The 3 months correlation between Center and Lotus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Center Laboratories and Lotus Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Pharmaceutical and Center Laboratories 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 Center Laboratories are associated (or correlated) with Lotus Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Pharmaceutical has no effect on the direction of Center Laboratories i.e., Center Laboratories and Lotus Pharmaceutical go up and down completely randomly.

Pair Corralation between Center Laboratories and Lotus Pharmaceutical

Assuming the 90 days trading horizon Center Laboratories is expected to under-perform the Lotus Pharmaceutical. In addition to that, Center Laboratories is 1.39 times more volatile than Lotus Pharmaceutical Co. It trades about -0.36 of its total potential returns per unit of risk. Lotus Pharmaceutical Co is currently generating about -0.22 per unit of volatility. If you would invest  28,550  in Lotus Pharmaceutical Co on September 25, 2024 and sell it today you would lose (2,200) from holding Lotus Pharmaceutical Co or give up 7.71% of portfolio value over 90 days.

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

Center Laboratories  vs.  Lotus Pharmaceutical Co

Center Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Center Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Center Laboratories is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lotus Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lotus Pharmaceutical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Center Laboratories and Lotus Pharmaceutical

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

The idea behind Center Laboratories and Lotus Pharmaceutical Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.