Correlation Between Volcon and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Volcon 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 Volcon and Lotus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volcon Inc and Lotus Technology Warrants, you can compare the effects of market volatilities on Volcon 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 Volcon with a short position of Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volcon and Lotus Technology.
Diversification Opportunities for Volcon and Lotus Technology
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volcon and Lotus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Lotus Technology Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology Warrants and Volcon 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 Volcon Inc 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 Warrants has no effect on the direction of Volcon i.e., Volcon and Lotus Technology go up and down completely randomly.
Pair Corralation between Volcon and Lotus Technology
Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Lotus Technology. But the stock apears to be less risky and, when comparing its historical volatility, Volcon Inc is 1.54 times less risky than Lotus Technology. The stock trades about -0.21 of its potential returns per unit of risk. The Lotus Technology Warrants is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 72.00 in Lotus Technology Warrants on August 31, 2024 and sell it today you would lose (44.00) from holding Lotus Technology Warrants or give up 61.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 40.37% |
| Values | Daily Returns |
Volcon Inc vs. Lotus Technology Warrants
Performance |
| Timeline |
| Volcon Inc |
| Lotus Technology Warrants |
Volcon and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volcon and Lotus Technology
The main advantage of trading using opposite Volcon and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volcon 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 Volcon Inc and Lotus Technology Warrants 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. ZEEKR Intelligent Technology | Lotus Technology vs. Volcon Inc | Lotus Technology vs. ECD Automotive Design | Lotus Technology vs. Ford Motor |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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