Correlation Between Karur Vysya and Lotus Eye

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

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

Diversification Opportunities for Karur Vysya and Lotus Eye

0.01

Correlation Coefficient

Karur Vysya  Lotus Eye

Significant diversification

The 3 months correlation between Karur and Lotus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Karur Vysya Bank 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 Karur Vysya 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 Karur Vysya Bank 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 Karur Vysya i.e., Karur Vysya and Lotus Eye go up and down completely randomly.

Pair Corralation between Karur Vysya and Lotus Eye

Assuming the 90 days trading horizon Karur Vysya Bank is expected to generate 0.76 times more return on investment than Lotus Eye. However, Karur Vysya Bank is 1.31 times less risky than Lotus Eye. It trades about 0.08 of its potential returns per unit of risk. Lotus Eye Hospital is currently generating about -0.02 per unit of risk. If you would invest  21,800  in Karur Vysya Bank on September 16, 2024 and sell it today you would earn a total of  1,961  from holding Karur Vysya Bank or generate 9.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Karur Vysya Bank  vs.  Lotus Eye Hospital

Karur Vysya Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Karur Vysya may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Karur Vysya and Lotus Eye

The main advantage of trading using opposite Karur Vysya and Lotus Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karur Vysya 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 Karur Vysya Bank 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.