Correlation Between Chembond Chemicals and Lotus Eye

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

By analyzing existing cross correlation between Chembond Chemicals and Lotus Eye Hospital, you can compare the effects of market volatilities on Chembond Chemicals and Lotus Eye 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 Chembond Chemicals with a short position of Lotus Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chembond Chemicals and Lotus Eye.

Diversification Opportunities for Chembond Chemicals and Lotus Eye

0.62

Correlation Coefficient

Chembond Chemicals  Lotus Eye

Poor diversification

The 3 months correlation between Chembond and Lotus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chembond Chemicals and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital and Chembond Chemicals 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 Chembond Chemicals are associated (or correlated) with Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of Chembond Chemicals i.e., Chembond Chemicals and Lotus Eye go up and down completely randomly.

Pair Corralation between Chembond Chemicals and Lotus Eye

Assuming the 90 days trading horizon Chembond Chemicals is expected to generate 0.79 times more return on investment than Lotus Eye. However, Chembond Chemicals is 1.27 times less risky than Lotus Eye. It trades about 0.01 of its potential returns per unit of risk. Lotus Eye Hospital is currently generating about -0.04 per unit of risk. If you would invest  60,405  in Chembond Chemicals on September 22, 2024 and sell it today you would earn a total of  305.00  from holding Chembond Chemicals or generate 0.5% return on investment over 90 days.

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

Chembond Chemicals  vs.  Lotus Eye Hospital

Chembond Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chembond Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Chembond Chemicals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Lotus Eye Hospital

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chembond Chemicals and Lotus Eye

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

The idea behind Chembond Chemicals and Lotus Eye Hospital 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.