Correlation Between Lotus Bakeries and Exmar NV

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

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

Diversification Opportunities for Lotus Bakeries and Exmar NV

-0.61

Correlation Coefficient

Lotus Bakeries  Exmar NV

Excellent diversification

The 3 months correlation between Lotus and Exmar is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and Exmar NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exmar NV and Lotus Bakeries 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 Bakeries are associated (or correlated) with Exmar NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exmar NV has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and Exmar NV go up and down completely randomly.

Pair Corralation between Lotus Bakeries and Exmar NV

Assuming the 90 days trading horizon Lotus Bakeries is expected to under-perform the Exmar NV. But the stock apears to be less risky and, when comparing its historical volatility, Lotus Bakeries is 3.25 times less risky than Exmar NV. The stock trades about -0.17 of its potential returns per unit of risk. The Exmar NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  948.00  in Exmar NV on September 16, 2024 and sell it today you would earn a total of  190.00  from holding Exmar NV or generate 20.04% return on investment over 90 days.

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

Lotus Bakeries  vs.  Exmar NV

Lotus Bakeries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Bakeries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Exmar NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exmar NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Exmar NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotus Bakeries and Exmar NV

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

The idea behind Lotus Bakeries and Exmar NV 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.