Correlation Between Tessenderlo and Lotus Bakeries
Can any of the company-specific risk be diversified away by investing in both Tessenderlo and Lotus Bakeries 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 Tessenderlo and Lotus Bakeries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tessenderlo and Lotus Bakeries, you can compare the effects of market volatilities on Tessenderlo and Lotus Bakeries 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 Tessenderlo with a short position of Lotus Bakeries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tessenderlo and Lotus Bakeries.
Diversification Opportunities for Tessenderlo and Lotus Bakeries
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tessenderlo and Lotus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tessenderlo and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Tessenderlo 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 Tessenderlo are associated (or correlated) with Lotus Bakeries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Bakeries has no effect on the direction of Tessenderlo i.e., Tessenderlo and Lotus Bakeries go up and down completely randomly.
Pair Corralation between Tessenderlo and Lotus Bakeries
Assuming the 90 days trading horizon Tessenderlo is expected to under-perform the Lotus Bakeries. But the stock apears to be less risky and, when comparing its historical volatility, Tessenderlo is 1.43 times less risky than Lotus Bakeries. The stock trades about -0.05 of its potential returns per unit of risk. The Lotus Bakeries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 670,225 in Lotus Bakeries on August 31, 2024 and sell it today you would earn a total of 465,775 from holding Lotus Bakeries or generate 69.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Tessenderlo vs. Lotus Bakeries
Performance |
| Timeline |
| Tessenderlo |
| Lotus Bakeries |
Tessenderlo and Lotus Bakeries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tessenderlo and Lotus Bakeries
The main advantage of trading using opposite Tessenderlo and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tessenderlo position performs unexpectedly, Lotus Bakeries 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 Bakeries will offset losses from the drop in Lotus Bakeries' long position.| Tessenderlo vs. Ackermans Van Haaren | Tessenderlo vs. NV Bekaert SA | Tessenderlo vs. Groep Brussel Lambert | Tessenderlo vs. Tubize Fin |
| Lotus Bakeries vs. Sofina Socit Anonyme | Lotus Bakeries vs. Ackermans Van Haaren | Lotus Bakeries vs. Melexis NV | Lotus Bakeries vs. DIeteren Group SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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