Correlation Between Lotus Bakeries and Sipef NV

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

Diversification Opportunities for Lotus Bakeries and Sipef NV

-0.89

Correlation Coefficient

Lotus Bakeries  Sipef NV

Pay attention - limited upside

The 3 months correlation between Lotus and Sipef is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and Sipef NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sipef 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 Sipef NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sipef NV has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and Sipef NV go up and down completely randomly.

Pair Corralation between Lotus Bakeries and Sipef NV

Assuming the 90 days trading horizon Lotus Bakeries is expected to under-perform the Sipef NV. In addition to that, Lotus Bakeries is 2.26 times more volatile than Sipef NV. It trades about -0.22 of its total potential returns per unit of risk. Sipef NV is currently generating about 0.16 per unit of volatility. If you would invest  5,680  in Sipef NV on December 28, 2024 and sell it today you would earn a total of  440.00  from holding Sipef NV or generate 7.75% return on investment over 90 days.

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

Lotus Bakeries  vs.  Sipef 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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sipef NV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sipef NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sipef NV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lotus Bakeries and Sipef NV

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

The idea behind Lotus Bakeries and Sipef 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.