Correlation Between Proximus and Lotus Bakeries

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

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

Diversification Opportunities for Proximus and Lotus Bakeries

0.63

Correlation Coefficient

Proximus  Lotus Bakeries

Poor diversification

The 3 months correlation between Proximus and Lotus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Proximus NV and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Proximus 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 Proximus NV are associated (or correlated) with Lotus Bakeries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Bakeries has no effect on the direction of Proximus i.e., Proximus and Lotus Bakeries go up and down completely randomly.

Pair Corralation between Proximus and Lotus Bakeries

Assuming the 90 days trading horizon Proximus NV is expected to under-perform the Lotus Bakeries. In addition to that, Proximus is 1.39 times more volatile than Lotus Bakeries. It trades about -0.2 of its total potential returns per unit of risk. Lotus Bakeries is currently generating about -0.11 per unit of volatility. If you would invest  1,212,000  in Lotus Bakeries on September 16, 2024 and sell it today you would lose (120,000) from holding Lotus Bakeries or give up 9.9% of portfolio value over 90 days.

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

Proximus NV  vs.  Lotus Bakeries

Proximus NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lotus Bakeries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Bakeries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Proximus and Lotus Bakeries

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

The idea behind Proximus NV and Lotus Bakeries 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.