Correlation Between Lotus Bakeries and Roularta
Can any of the company-specific risk be diversified away by investing in both Lotus Bakeries and Roularta 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 Roularta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotus Bakeries and Roularta, you can compare the effects of market volatilities on Lotus Bakeries and Roularta 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 Roularta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Bakeries and Roularta.
Diversification Opportunities for Lotus Bakeries and Roularta
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lotus and Roularta is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Bakeries and Roularta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roularta 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 Roularta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roularta has no effect on the direction of Lotus Bakeries i.e., Lotus Bakeries and Roularta go up and down completely randomly.
Pair Corralation between Lotus Bakeries and Roularta
Assuming the 90 days trading horizon Lotus Bakeries is expected to generate 1.53 times more return on investment than Roularta. However, Lotus Bakeries is 1.53 times more volatile than Roularta. It trades about -0.14 of its potential returns per unit of risk. Roularta is currently generating about -0.23 per unit of risk. If you would invest 1,196,000 in Lotus Bakeries on September 3, 2024 and sell it today you would lose (58,000) from holding Lotus Bakeries or give up 4.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lotus Bakeries vs. Roularta
Performance |
| Timeline |
| Lotus Bakeries |
| Roularta |
Lotus Bakeries and Roularta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lotus Bakeries and Roularta
The main advantage of trading using opposite Lotus Bakeries and Roularta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotus Bakeries position performs unexpectedly, Roularta 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 Roularta will offset losses from the drop in Roularta'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 |
| Roularta vs. Tessenderlo | Roularta vs. EVS Broadcast Equipment | Roularta vs. Sipef NV | Roularta vs. Exmar NV |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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