Correlation Between Lotus Bakeries and Miko NV

Can any of the company-specific risk be diversified away by investing in both Lotus Bakeries and Miko 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 Miko 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 Miko NV, you can compare the effects of market volatilities on Lotus Bakeries and Miko 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 Miko NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Bakeries and Miko NV.

Diversification Opportunities for Lotus Bakeries and Miko NV

0.09

Correlation Coefficient

Lotus Bakeries  Miko NV

Significant diversification

The 3 months correlation between Lotus and Miko is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and Miko NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miko 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 Miko NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miko NV has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and Miko NV go up and down completely randomly.

Pair Corralation between Lotus Bakeries and Miko NV

Assuming the 90 days trading horizon Lotus Bakeries is expected to under-perform the Miko NV. But the stock apears to be less risky and, when comparing its historical volatility, Lotus Bakeries is 1.33 times less risky than Miko NV. The stock trades about -0.22 of its potential returns per unit of risk. The Miko NV is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,200  in Miko NV on November 28, 2024 and sell it today you would lose (140.00) from holding Miko NV or give up 2.69% of portfolio value over 90 days.

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

Lotus Bakeries  vs.  Miko NV

Lotus Bakeries

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Miko NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Miko NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Miko NV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lotus Bakeries and Miko NV

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

The idea behind Lotus Bakeries and Miko 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.