Correlation Between Lotes and Jentech Precision

Can any of the company-specific risk be diversified away by investing in both Lotes and Jentech Precision 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 Lotes and Jentech Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lotes Co and Jentech Precision Industrial, you can compare the effects of market volatilities on Lotes and Jentech Precision 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 Lotes with a short position of Jentech Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and Jentech Precision.

Diversification Opportunities for Lotes and Jentech Precision

0.76

Correlation Coefficient

Lotes  Jentech Precision

Poor diversification

The 3 months correlation between Lotes and Jentech is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Jentech Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jentech Precision and Lotes 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 Lotes Co are associated (or correlated) with Jentech Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jentech Precision has no effect on the direction of Lotes i.e., Lotes and Jentech Precision go up and down completely randomly.

Pair Corralation between Lotes and Jentech Precision

Assuming the 90 days trading horizon Lotes Co is expected to generate 1.11 times more return on investment than Jentech Precision. However, Lotes is 1.11 times more volatile than Jentech Precision Industrial. It trades about 0.16 of its potential returns per unit of risk. Jentech Precision Industrial is currently generating about 0.1 per unit of risk. If you would invest  142,500  in Lotes Co on September 12, 2024 and sell it today you would earn a total of  46,000  from holding Lotes Co or generate 32.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lotes Co  vs.  Jentech Precision Industrial

Lotes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes showed solid returns over the last few months and may actually be approaching a breakup point.

Jentech Precision

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jentech Precision Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Jentech Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lotes and Jentech Precision

The main advantage of trading using opposite Lotes and Jentech Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lotes position performs unexpectedly, Jentech Precision 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 Jentech Precision will offset losses from the drop in Jentech Precision's long position.

The idea behind Lotes Co and Jentech Precision Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.