Correlation Between Lotus Eye and TVS Electronics

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Can any of the company-specific risk be diversified away by investing in both Lotus Eye and TVS Electronics 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 Eye and TVS Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lotus Eye Hospital and TVS Electronics Limited, you can compare the effects of market volatilities on Lotus Eye and TVS Electronics 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 Eye with a short position of TVS Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Eye and TVS Electronics.

Diversification Opportunities for Lotus Eye and TVS Electronics

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lotus and TVS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Eye Hospital and TVS Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVS Electronics and Lotus Eye 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 Eye Hospital are associated (or correlated) with TVS Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVS Electronics has no effect on the direction of Lotus Eye i.e., Lotus Eye and TVS Electronics go up and down completely randomly.

Pair Corralation between Lotus Eye and TVS Electronics

Assuming the 90 days trading horizon Lotus Eye Hospital is expected to generate 1.17 times more return on investment than TVS Electronics. However, Lotus Eye is 1.17 times more volatile than TVS Electronics Limited. It trades about 0.09 of its potential returns per unit of risk. TVS Electronics Limited is currently generating about 0.05 per unit of risk. If you would invest  5,450  in Lotus Eye Hospital on September 3, 2024 and sell it today you would earn a total of  1,933  from holding Lotus Eye Hospital or generate 35.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lotus Eye Hospital  vs.  TVS Electronics Limited

 Performance 
       Timeline  
Lotus Eye Hospital 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Lotus Eye Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Lotus Eye is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
TVS Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TVS Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lotus Eye and TVS Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lotus Eye and TVS Electronics

The main advantage of trading using opposite Lotus Eye and TVS Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotus Eye position performs unexpectedly, TVS Electronics 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 TVS Electronics will offset losses from the drop in TVS Electronics' long position.
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The idea behind Lotus Eye Hospital and TVS Electronics Limited 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.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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