Correlation Between Lotus Health and Shenzhen Bioeasy

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

By analyzing existing cross correlation between Lotus Health Group and Shenzhen Bioeasy Biotechnology, you can compare the effects of market volatilities on Lotus Health and Shenzhen Bioeasy 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 Lotus Health with a short position of Shenzhen Bioeasy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Health and Shenzhen Bioeasy.

Diversification Opportunities for Lotus Health and Shenzhen Bioeasy

0.29

Correlation Coefficient

Lotus Health  Shenzhen Bioeasy

Modest diversification

The 3 months correlation between Lotus and Shenzhen is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Health Group and Shenzhen Bioeasy Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Bioeasy Bio and Lotus Health 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 Lotus Health Group are associated (or correlated) with Shenzhen Bioeasy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Bioeasy Bio has no effect on the direction of Lotus Health i.e., Lotus Health and Shenzhen Bioeasy go up and down completely randomly.

Pair Corralation between Lotus Health and Shenzhen Bioeasy

Assuming the 90 days trading horizon Lotus Health Group is expected to generate 1.84 times more return on investment than Shenzhen Bioeasy. However, Lotus Health is 1.84 times more volatile than Shenzhen Bioeasy Biotechnology. It trades about 0.11 of its potential returns per unit of risk. Shenzhen Bioeasy Biotechnology is currently generating about 0.02 per unit of risk. If you would invest  474.00  in Lotus Health Group on December 25, 2024 and sell it today you would earn a total of  136.00  from holding Lotus Health Group or generate 28.69% return on investment over 90 days.

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

Lotus Health Group  vs.  Shenzhen Bioeasy Biotechnology

Lotus Health Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lotus Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Bioeasy Bio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Bioeasy Biotechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Bioeasy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lotus Health and Shenzhen Bioeasy

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

The idea behind Lotus Health Group and Shenzhen Bioeasy Biotechnology 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 Global Correlations module to find global opportunities by holding instruments from different markets.