Correlation Between Lotus Resources and Vertical Exploration

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

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

Diversification Opportunities for Lotus Resources and Vertical Exploration

0.0

Correlation Coefficient

Lotus Resources  Vertical Exploration

Pay attention - limited upside

The 3 months correlation between Lotus and Vertical is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Resources Limited and Vertical Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertical Exploration and Lotus Resources 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 Resources Limited are associated (or correlated) with Vertical Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertical Exploration has no effect on the direction of Lotus Resources i.e., Lotus Resources and Vertical Exploration go up and down completely randomly.

Pair Corralation between Lotus Resources and Vertical Exploration

Assuming the 90 days horizon Lotus Resources Limited is expected to generate 2.59 times more return on investment than Vertical Exploration. However, Lotus Resources is 2.59 times more volatile than Vertical Exploration. It trades about 0.01 of its potential returns per unit of risk. Vertical Exploration is currently generating about -0.06 per unit of risk. If you would invest  19.00  in Lotus Resources Limited on September 4, 2024 and sell it today you would lose (3.00) from holding Lotus Resources Limited or give up 15.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Lotus Resources Limited  vs.  Vertical Exploration

Lotus Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lotus Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Vertical Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertical Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vertical Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lotus Resources and Vertical Exploration

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

The idea behind Lotus Resources Limited and Vertical Exploration 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.