Correlation Between Malu Paper and Lotus Eye

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

By analyzing existing cross correlation between Malu Paper Mills and Lotus Eye Hospital, you can compare the effects of market volatilities on Malu Paper and Lotus Eye 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 Malu Paper with a short position of Lotus Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malu Paper and Lotus Eye.

Diversification Opportunities for Malu Paper and Lotus Eye

0.85

Correlation Coefficient

Malu Paper  Lotus Eye

Very poor diversification

The 3 months correlation between Malu and Lotus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Malu Paper Mills and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital and Malu Paper 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 Malu Paper Mills are associated (or correlated) with Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of Malu Paper i.e., Malu Paper and Lotus Eye go up and down completely randomly.

Pair Corralation between Malu Paper and Lotus Eye

Assuming the 90 days trading horizon Malu Paper Mills is expected to under-perform the Lotus Eye. In addition to that, Malu Paper is 1.01 times more volatile than Lotus Eye Hospital. It trades about -0.13 of its total potential returns per unit of risk. Lotus Eye Hospital is currently generating about 0.05 per unit of volatility. If you would invest  6,619  in Lotus Eye Hospital on December 26, 2024 and sell it today you would earn a total of  438.00  from holding Lotus Eye Hospital or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Malu Paper Mills  vs.  Lotus Eye Hospital

Malu Paper Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malu Paper Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Lotus Eye Hospital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Eye Hospital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Lotus Eye may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Malu Paper and Lotus Eye

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

The idea behind Malu Paper Mills and Lotus Eye Hospital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.