Correlation Between Semiconductor Manufacturing and Lotus Health

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

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

Diversification Opportunities for Semiconductor Manufacturing and Lotus Health

-0.41

Correlation Coefficient

Semiconductor Manufacturing  Lotus Health

Very good diversification

The 3 months correlation between Semiconductor and Lotus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Semiconductor Manufacturing In and Lotus Health Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Health Group and Semiconductor Manufacturing 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 Semiconductor Manufacturing Intl are associated (or correlated) with Lotus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Health Group has no effect on the direction of Semiconductor Manufacturing i.e., Semiconductor Manufacturing and Lotus Health go up and down completely randomly.

Pair Corralation between Semiconductor Manufacturing and Lotus Health

Assuming the 90 days trading horizon Semiconductor Manufacturing is expected to generate 2.69 times less return on investment than Lotus Health. But when comparing it to its historical volatility, Semiconductor Manufacturing Intl is 1.33 times less risky than Lotus Health. It trades about 0.03 of its potential returns per unit of risk. Lotus Health Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  465.00  in Lotus Health Group on October 26, 2024 and sell it today you would earn a total of  68.00  from holding Lotus Health Group or generate 14.62% return on investment over 90 days.

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

Semiconductor Manufacturing In  vs.  Lotus Health Group

Semiconductor Manufacturing

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Semiconductor Manufacturing Intl are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semiconductor Manufacturing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lotus Health Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Health Group are ranked lower than 5 (%) 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.

Pair Trading with Semiconductor Manufacturing and Lotus Health

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

The idea behind Semiconductor Manufacturing Intl and Lotus Health Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.