Correlation Between Lotes and FineMat Applied
Can any of the company-specific risk be diversified away by investing in both Lotes and FineMat Applied 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 FineMat Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotes Co and FineMat Applied Materials, you can compare the effects of market volatilities on Lotes and FineMat Applied 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 FineMat Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and FineMat Applied.
Diversification Opportunities for Lotes and FineMat Applied
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lotes and FineMat is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and FineMat Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FineMat Applied Materials 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 FineMat Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FineMat Applied Materials has no effect on the direction of Lotes i.e., Lotes and FineMat Applied go up and down completely randomly.
Pair Corralation between Lotes and FineMat Applied
Assuming the 90 days trading horizon Lotes Co is expected to generate 0.95 times more return on investment than FineMat Applied. However, Lotes Co is 1.05 times less risky than FineMat Applied. It trades about 0.07 of its potential returns per unit of risk. FineMat Applied Materials is currently generating about 0.03 per unit of risk. If you would invest 85,224 in Lotes Co on August 26, 2024 and sell it today you would earn a total of 90,276 from holding Lotes Co or generate 105.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lotes Co vs. FineMat Applied Materials
Performance |
| Timeline |
| Lotes |
| FineMat Applied Materials |
Lotes and FineMat Applied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotes and FineMat Applied
The main advantage of trading using opposite Lotes and FineMat Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotes position performs unexpectedly, FineMat Applied 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 FineMat Applied will offset losses from the drop in FineMat Applied's long position.The idea behind Lotes Co and FineMat Applied Materials 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.| FineMat Applied vs. Advantech Co | FineMat Applied vs. IEI Integration Corp | FineMat Applied vs. Flytech Technology Co | FineMat Applied vs. ADLINK Technology |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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