Correlation Between Lotus Resources and Emerita Resources

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

Diversification Opportunities for Lotus Resources and Emerita Resources

-0.08

Correlation Coefficient

Lotus Resources  Emerita Resources

Good diversification

The 3 months correlation between Lotus and Emerita is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Resources Limited and Emerita Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerita Resources Corp 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 Emerita Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerita Resources Corp has no effect on the direction of Lotus Resources i.e., Lotus Resources and Emerita Resources go up and down completely randomly.

Pair Corralation between Lotus Resources and Emerita Resources

Assuming the 90 days horizon Lotus Resources Limited is expected to under-perform the Emerita Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, Lotus Resources Limited is 1.02 times less risky than Emerita Resources. The otc stock trades about -0.04 of its potential returns per unit of risk. The Emerita Resources Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Emerita Resources Corp on November 30, 2024 and sell it today you would earn a total of  52.00  from holding Emerita Resources Corp or generate 104.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Lotus Resources Limited  vs.  Emerita Resources Corp

Lotus Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotus Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Emerita Resources Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerita Resources Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Emerita Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotus Resources and Emerita Resources

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

The idea behind Lotus Resources Limited and Emerita Resources Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.