Correlation Between Sofina Socit and Lotus Bakeries

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

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

Diversification Opportunities for Sofina Socit and Lotus Bakeries

-0.31

Correlation Coefficient

Sofina Socit  Lotus Bakeries

Very good diversification

The 3 months correlation between Sofina and Lotus is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Sofina Socit 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 Sofina Socit Anonyme 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 Sofina Socit i.e., Sofina Socit and Lotus Bakeries go up and down completely randomly.

Pair Corralation between Sofina Socit and Lotus Bakeries

Assuming the 90 days trading horizon Sofina Socit Anonyme is expected to generate 0.91 times more return on investment than Lotus Bakeries. However, Sofina Socit Anonyme is 1.1 times less risky than Lotus Bakeries. It trades about 0.12 of its potential returns per unit of risk. Lotus Bakeries is currently generating about -0.22 per unit of risk. If you would invest  21,720  in Sofina Socit Anonyme on December 30, 2024 and sell it today you would earn a total of  2,540  from holding Sofina Socit Anonyme or generate 11.69% return on investment over 90 days.

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

Sofina Socit Anonyme  vs.  Lotus Bakeries

Sofina Socit Anonyme

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Sofina Socit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lotus Bakeries

Risk-Adjusted Performance

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 weak 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.

Pair Trading with Sofina Socit and Lotus Bakeries

The main advantage of trading using opposite Sofina Socit and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sofina Socit 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 Sofina Socit Anonyme 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.