Correlation Between Lotus Bakeries and DEME Group
Can any of the company-specific risk be diversified away by investing in both Lotus Bakeries and DEME Group 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 Lotus Bakeries and DEME Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotus Bakeries and DEME Group NV, you can compare the effects of market volatilities on Lotus Bakeries and DEME Group 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 Lotus Bakeries with a short position of DEME Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Bakeries and DEME Group.
Diversification Opportunities for Lotus Bakeries and DEME Group
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lotus and DEME is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and DEME Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEME Group NV and Lotus Bakeries 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 Lotus Bakeries are associated (or correlated) with DEME Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEME Group NV has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and DEME Group go up and down completely randomly.
Pair Corralation between Lotus Bakeries and DEME Group
Assuming the 90 days trading horizon Lotus Bakeries is expected to under-perform the DEME Group. But the stock apears to be less risky and, when comparing its historical volatility, Lotus Bakeries is 1.43 times less risky than DEME Group. The stock trades about -0.16 of its potential returns per unit of risk. The DEME Group NV is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 14,960 in DEME Group NV on September 12, 2024 and sell it today you would lose (420.00) from holding DEME Group NV or give up 2.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Lotus Bakeries vs. DEME Group NV
Performance |
| Timeline |
| Lotus Bakeries |
| DEME Group NV |
Lotus Bakeries and DEME Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotus Bakeries and DEME Group
The main advantage of trading using opposite Lotus Bakeries and DEME Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotus Bakeries position performs unexpectedly, DEME Group 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 DEME Group will offset losses from the drop in DEME Group's long position.| Lotus Bakeries vs. Sofina Socit Anonyme | Lotus Bakeries vs. Ackermans Van Haaren | Lotus Bakeries vs. Melexis NV | Lotus Bakeries vs. DIeteren Group SA |
| DEME Group vs. Compagnie d Entreprises | DEME Group vs. DIeteren Group SA | DEME Group vs. Ackermans Van Haaren | DEME Group vs. Sofina Socit Anonyme |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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