Correlation Between American Funds and Lotus Bakeries
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Lotus Bakeries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Lotus Bakeries, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Lotus Bakeries. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Lotus Bakeries.
Diversification Opportunities for American Funds and Lotus Bakeries
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Lotus is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and American Funds 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 American Funds Fundamental 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 American Funds i.e., American Funds and Lotus Bakeries go up and down completely randomly.
Pair Corralation between American Funds and Lotus Bakeries
Assuming the 90 days horizon American Funds is expected to generate 1.3 times less return on investment than Lotus Bakeries. But when comparing it to its historical volatility, American Funds Fundamental is 1.19 times less risky than Lotus Bakeries. It trades about 0.04 of its potential returns per unit of risk. Lotus Bakeries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 932,573 in Lotus Bakeries on November 3, 2024 and sell it today you would earn a total of 97,427 from holding Lotus Bakeries or generate 10.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.86% |
| Values | Daily Returns |
American Funds Fundamental vs. Lotus Bakeries
Performance |
| Timeline |
| American Funds Funda |
| Lotus Bakeries |
American Funds and Lotus Bakeries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Lotus Bakeries
The main advantage of trading using opposite American Funds and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Federated Emerging Market | American Funds vs. Siit Emerging Markets | American Funds vs. Mid Cap 15x Strategy | American Funds vs. Ashmore Emerging Markets |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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