Correlation Between Lotus Eye and Kohinoor Foods

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

Diversification Opportunities for Lotus Eye and Kohinoor Foods

0.24

Correlation Coefficient

Lotus Eye  Kohinoor Foods

Modest diversification

The 3 months correlation between Lotus and Kohinoor is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Eye Hospital and Kohinoor Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohinoor Foods 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 Kohinoor Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohinoor Foods has no effect on the direction of Lotus Eye i.e., Lotus Eye and Kohinoor Foods go up and down completely randomly.

Pair Corralation between Lotus Eye and Kohinoor Foods

Assuming the 90 days trading horizon Lotus Eye is expected to generate 1.22 times less return on investment than Kohinoor Foods. But when comparing it to its historical volatility, Lotus Eye Hospital is 2.09 times less risky than Kohinoor Foods. It trades about 0.02 of its potential returns per unit of risk. Kohinoor Foods Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,034  in Kohinoor Foods Limited on October 24, 2024 and sell it today you would lose (43.00) from holding Kohinoor Foods Limited or give up 1.07% of portfolio value over 90 days.

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

Lotus Eye Hospital  vs.  Kohinoor Foods 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Kohinoor Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohinoor Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kohinoor Foods is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lotus Eye and Kohinoor Foods

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

The idea behind Lotus Eye Hospital and Kohinoor Foods 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.