Correlation Between Lotus Pharmaceuticals and China Teletech

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

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

Diversification Opportunities for Lotus Pharmaceuticals and China Teletech

-0.17

Correlation Coefficient

Lotus Pharmaceuticals  China Teletech

Good diversification

The 3 months correlation between Lotus and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Pharmaceuticals and China Teletech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Teletech Holding and Lotus Pharmaceuticals 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 Pharmaceuticals are associated (or correlated) with China Teletech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Teletech Holding has no effect on the direction of Lotus Pharmaceuticals i.e., Lotus Pharmaceuticals and China Teletech go up and down completely randomly.

Pair Corralation between Lotus Pharmaceuticals and China Teletech

Given the investment horizon of 90 days Lotus Pharmaceuticals is expected to generate 1.09 times more return on investment than China Teletech. However, Lotus Pharmaceuticals is 1.09 times more volatile than China Teletech Holding. It trades about 0.09 of its potential returns per unit of risk. China Teletech Holding is currently generating about 0.02 per unit of risk. If you would invest  0.70  in Lotus Pharmaceuticals on October 11, 2024 and sell it today you would lose (0.17) from holding Lotus Pharmaceuticals or give up 24.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Lotus Pharmaceuticals  vs.  China Teletech Holding

Lotus Pharmaceuticals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lotus Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Teletech Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Teletech Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, China Teletech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotus Pharmaceuticals and China Teletech

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

The idea behind Lotus Pharmaceuticals and China Teletech Holding 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.