Correlation Between Garrett Motion and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Garrett Motion and Lotus 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 Garrett Motion and Lotus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Garrett Motion and Lotus Technology American, you can compare the effects of market volatilities on Garrett Motion and Lotus 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 Garrett Motion with a short position of Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garrett Motion and Lotus Technology.
Diversification Opportunities for Garrett Motion and Lotus Technology
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Garrett and Lotus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Garrett Motion and Lotus Technology American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology American and Garrett Motion 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 Garrett Motion are associated (or correlated) with Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology American has no effect on the direction of Garrett Motion i.e., Garrett Motion and Lotus Technology go up and down completely randomly.
Pair Corralation between Garrett Motion and Lotus Technology
Considering the 90-day investment horizon Garrett Motion is expected to generate 0.51 times more return on investment than Lotus Technology. However, Garrett Motion is 1.94 times less risky than Lotus Technology. It trades about 0.02 of its potential returns per unit of risk. Lotus Technology American is currently generating about -0.02 per unit of risk. If you would invest 753.00 in Garrett Motion on August 27, 2024 and sell it today you would earn a total of 78.00 from holding Garrett Motion or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Garrett Motion vs. Lotus Technology American
Performance |
| Timeline |
| Garrett Motion |
| Lotus Technology American |
Garrett Motion and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Garrett Motion and Lotus Technology
The main advantage of trading using opposite Garrett Motion and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garrett Motion position performs unexpectedly, Lotus 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 Lotus Technology will offset losses from the drop in Lotus Technology's long position.The idea behind Garrett Motion and Lotus Technology American 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 Technology vs. Grocery Outlet Holding | Lotus Technology vs. Titan Machinery | Lotus Technology vs. Getty Realty | Lotus Technology vs. Upper Street Marketing |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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