Correlation Between Apple and Lotus Bakeries
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Lotus Bakeries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Lotus Bakeries, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Lotus Bakeries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Lotus Bakeries.
Diversification Opportunities for Apple and Lotus Bakeries
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Apple and Lotus is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Apple 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 Apple Inc 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 Apple i.e., Apple and Lotus Bakeries go up and down completely randomly.
Pair Corralation between Apple and Lotus Bakeries
Given the investment horizon of 90 days Apple Inc is expected to under-perform the Lotus Bakeries. In addition to that, Apple is 1.17 times more volatile than Lotus Bakeries. It trades about -0.39 of its total potential returns per unit of risk. Lotus Bakeries is currently generating about -0.04 per unit of volatility. If you would invest 1,074,000 in Lotus Bakeries on October 23, 2024 and sell it today you would lose (12,000) from holding Lotus Bakeries or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Lotus Bakeries
Performance |
| Timeline |
| Apple Inc |
| Lotus Bakeries |
Apple and Lotus Bakeries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Lotus Bakeries
The main advantage of trading using opposite Apple and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.| Lotus Bakeries vs. Sofina Socit Anonyme | Lotus Bakeries vs. Ackermans Van Haaren | Lotus Bakeries vs. Melexis NV | Lotus Bakeries vs. DIeteren Group SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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