Correlation Between Lotus Eye and Life Insurance

Can any of the company-specific risk be diversified away by investing in both Lotus Eye and Life Insurance 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 Life Insurance 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 Life Insurance, you can compare the effects of market volatilities on Lotus Eye and Life Insurance 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 Life Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotus Eye and Life Insurance.

Diversification Opportunities for Lotus Eye and Life Insurance

0.81

Correlation Coefficient

Lotus Eye  Life Insurance

Very poor diversification

The 3 months correlation between Lotus and Life is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lotus Eye Hospital and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance 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 Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Lotus Eye i.e., Lotus Eye and Life Insurance go up and down completely randomly.

Pair Corralation between Lotus Eye and Life Insurance

Assuming the 90 days trading horizon Lotus Eye Hospital is expected to under-perform the Life Insurance. In addition to that, Lotus Eye is 1.24 times more volatile than Life Insurance. It trades about -0.06 of its total potential returns per unit of risk. Life Insurance is currently generating about -0.04 per unit of volatility. If you would invest  90,720  in Life Insurance on September 27, 2024 and sell it today you would lose (1,655) from holding Life Insurance or give up 1.82% of portfolio value over 90 days.

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

Lotus Eye Hospital  vs.  Life Insurance

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lotus Eye and Life Insurance

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

The idea behind Lotus Eye Hospital and Life Insurance 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.