Correlation Between Lotus Eye and Clean Science

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

Diversification Opportunities for Lotus Eye and Clean Science

0.89

Correlation Coefficient

Lotus Eye  Clean Science

Very poor diversification

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

Pair Corralation between Lotus Eye and Clean Science

Assuming the 90 days trading horizon Lotus Eye Hospital is expected to generate 1.05 times more return on investment than Clean Science. However, Lotus Eye is 1.05 times more volatile than Clean Science and. It trades about -0.06 of its potential returns per unit of risk. Clean Science and is currently generating about -0.09 per unit of risk. If you would invest  6,750  in Lotus Eye Hospital on December 24, 2024 and sell it today you would lose (667.00) from holding Lotus Eye Hospital or give up 9.88% of portfolio value over 90 days.

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

Lotus Eye Hospital  vs.  Clean Science and

Lotus Eye Hospital

Risk-Adjusted Performance

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 latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Clean Science

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lotus Eye and Clean Science

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

The idea behind Lotus Eye Hospital and Clean Science and 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.