Correlation Between Lotes and Catcher Technology
Can any of the company-specific risk be diversified away by investing in both Lotes and Catcher Technology 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 Lotes and Catcher Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotes Co and Catcher Technology Co, you can compare the effects of market volatilities on Lotes and Catcher Technology 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 Lotes with a short position of Catcher Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and Catcher Technology.
Diversification Opportunities for Lotes and Catcher Technology
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lotes and Catcher is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Catcher Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catcher Technology and Lotes 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 Lotes Co are associated (or correlated) with Catcher Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catcher Technology has no effect on the direction of Lotes i.e., Lotes and Catcher Technology go up and down completely randomly.
Pair Corralation between Lotes and Catcher Technology
Assuming the 90 days trading horizon Lotes Co is expected to generate 1.07 times more return on investment than Catcher Technology. However, Lotes is 1.07 times more volatile than Catcher Technology Co. It trades about -0.02 of its potential returns per unit of risk. Catcher Technology Co is currently generating about -0.4 per unit of risk. If you would invest 175,500 in Lotes Co on August 28, 2024 and sell it today you would lose (2,500) from holding Lotes Co or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotes Co vs. Catcher Technology Co
Performance |
| Timeline |
| Lotes |
| Catcher Technology |
Lotes and Catcher Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotes and Catcher Technology
The main advantage of trading using opposite Lotes and Catcher Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotes position performs unexpectedly, Catcher Technology 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 Catcher Technology will offset losses from the drop in Catcher Technology's long position.The idea behind Lotes Co and Catcher Technology Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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