Correlation Between Dow Jones and Lotus Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lotus Pharmaceuticals 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 Dow Jones and Lotus Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Lotus Pharmaceuticals, you can compare the effects of market volatilities on Dow Jones and Lotus Pharmaceuticals 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 Dow Jones with a short position of Lotus Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lotus Pharmaceuticals.
Diversification Opportunities for Dow Jones and Lotus Pharmaceuticals
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Lotus is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lotus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Pharmaceuticals and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Lotus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Pharmaceuticals has no effect on the direction of Dow Jones i.e., Dow Jones and Lotus Pharmaceuticals go up and down completely randomly.
Pair Corralation between Dow Jones and Lotus Pharmaceuticals
Assuming the 90 days trading horizon Dow Jones is expected to generate 26.1 times less return on investment than Lotus Pharmaceuticals. But when comparing it to its historical volatility, Dow Jones Industrial is 51.85 times less risky than Lotus Pharmaceuticals. It trades about 0.12 of its potential returns per unit of risk. Lotus Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.60 in Lotus Pharmaceuticals on August 26, 2024 and sell it today you would lose (0.52) from holding Lotus Pharmaceuticals or give up 86.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lotus Pharmaceuticals
Performance |
| Timeline |
Dow Jones and Lotus Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lotus Pharmaceuticals
Pair trading matchups for Lotus Pharmaceuticals
Pair Trading with Dow Jones and Lotus Pharmaceuticals
The main advantage of trading using opposite Dow Jones and Lotus Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lotus Pharmaceuticals 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 Pharmaceuticals will offset losses from the drop in Lotus Pharmaceuticals' long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Lotus Pharmaceuticals vs. Rezolute | Lotus Pharmaceuticals vs. Tempest Therapeutics | Lotus Pharmaceuticals vs. Forte Biosciences | Lotus Pharmaceuticals vs. Dyadic International |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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