Correlation Between Lotus Bakeries and Tubize Fin

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

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

Diversification Opportunities for Lotus Bakeries and Tubize Fin

0.59

Correlation Coefficient

Lotus Bakeries  Tubize Fin

Very weak diversification

The 3 months correlation between Lotus and Tubize is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and Tubize Fin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tubize Fin 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 Tubize Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tubize Fin has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and Tubize Fin go up and down completely randomly.

Pair Corralation between Lotus Bakeries and Tubize Fin

Assuming the 90 days trading horizon Lotus Bakeries is not expected to generate positive returns. However, Lotus Bakeries is 1.45 times less risky than Tubize Fin. It waists most of its returns potential to compensate for thr risk taken. Tubize Fin is generating about 0.11 per unit of risk. If you would invest  12,200  in Tubize Fin on September 2, 2024 and sell it today you would earn a total of  1,580  from holding Tubize Fin or generate 12.95% return on investment over 90 days.

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

Lotus Bakeries  vs.  Tubize Fin

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 relatively invariable basic indicators, Lotus Bakeries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tubize Fin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tubize Fin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Tubize Fin reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotus Bakeries and Tubize Fin

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

The idea behind Lotus Bakeries and Tubize Fin 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.