Correlation Between California Software and Lotus Eye

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

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

Diversification Opportunities for California Software and Lotus Eye

0.22

Correlation Coefficient

California Software  Lotus Eye

Modest diversification

The 3 months correlation between California and Lotus is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding California Software and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital and California Software 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 California Software are associated (or correlated) with Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of California Software i.e., California Software and Lotus Eye go up and down completely randomly.

Pair Corralation between California Software and Lotus Eye

Assuming the 90 days trading horizon California Software is expected to under-perform the Lotus Eye. In addition to that, California Software is 2.51 times more volatile than Lotus Eye Hospital. It trades about -0.03 of its total potential returns per unit of risk. Lotus Eye Hospital is currently generating about 0.0 per unit of volatility. If you would invest  7,155  in Lotus Eye Hospital on October 20, 2024 and sell it today you would lose (107.00) from holding Lotus Eye Hospital or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

California Software  vs.  Lotus Eye Hospital

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lotus Eye Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Eye Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Lotus Eye is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California Software and Lotus Eye

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

The idea behind California Software and Lotus Eye Hospital 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.