Correlation Between Lotus Eye and Aarti Drugs

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

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

Diversification Opportunities for Lotus Eye and Aarti Drugs

0.46

Correlation Coefficient

Lotus Eye  Aarti Drugs

Very weak diversification

The 3 months correlation between Lotus and Aarti is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Eye Hospital and Aarti Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarti Drugs Limited and Lotus Eye 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 Eye Hospital are associated (or correlated) with Aarti Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarti Drugs Limited has no effect on the direction of Lotus Eye i.e., Lotus Eye and Aarti Drugs go up and down completely randomly.

Pair Corralation between Lotus Eye and Aarti Drugs

Assuming the 90 days trading horizon Lotus Eye Hospital is not expected to generate positive returns. Moreover, Lotus Eye is 2.49 times more volatile than Aarti Drugs Limited. It trades away all of its potential returns to assume current level of volatility. Aarti Drugs Limited is currently generating about -0.27 per unit of risk. If you would invest  7,336  in Lotus Eye Hospital on September 19, 2024 and sell it today you would lose (141.00) from holding Lotus Eye Hospital or give up 1.92% of portfolio value over 90 days.

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

Lotus Eye Hospital  vs.  Aarti Drugs Limited

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 current stock price disturbance, may contribute to short-term losses for the investors.

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Lotus Eye and Aarti Drugs

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

The idea behind Lotus Eye Hospital and Aarti Drugs Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.