Correlation Between Asmedia Technology and Lotes

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

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

Diversification Opportunities for Asmedia Technology and Lotes

0.76

Correlation Coefficient

Asmedia Technology  Lotes

Poor diversification

The 3 months correlation between Asmedia and Lotes is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and Lotes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotes and Asmedia Technology 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 Asmedia Technology are associated (or correlated) with Lotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotes has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and Lotes go up and down completely randomly.

Pair Corralation between Asmedia Technology and Lotes

Assuming the 90 days trading horizon Asmedia Technology is expected to generate 1.44 times less return on investment than Lotes. In addition to that, Asmedia Technology is 1.07 times more volatile than Lotes Co. It trades about 0.13 of its total potential returns per unit of risk. Lotes Co is currently generating about 0.2 per unit of volatility. If you would invest  135,500  in Lotes Co on September 15, 2024 and sell it today you would earn a total of  57,500  from holding Lotes Co or generate 42.44% return on investment over 90 days.

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

Asmedia Technology  vs.  Lotes Co

Asmedia Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Lotes

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asmedia Technology and Lotes

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

The idea behind Asmedia Technology and Lotes 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.