Correlation Between Nextensa and Lotus Bakeries
Can any of the company-specific risk be diversified away by investing in both Nextensa 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 Nextensa and Lotus Bakeries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextensa NV and Lotus Bakeries, you can compare the effects of market volatilities on Nextensa 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 Nextensa with a short position of Lotus Bakeries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextensa and Lotus Bakeries.
Diversification Opportunities for Nextensa and Lotus Bakeries
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nextensa and Lotus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nextensa NV and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Nextensa 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 Nextensa NV 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 Nextensa i.e., Nextensa and Lotus Bakeries go up and down completely randomly.
Pair Corralation between Nextensa and Lotus Bakeries
Assuming the 90 days trading horizon Nextensa NV is expected to under-perform the Lotus Bakeries. But the stock apears to be less risky and, when comparing its historical volatility, Nextensa NV is 1.05 times less risky than Lotus Bakeries. The stock trades about -0.22 of its potential returns per unit of risk. The Lotus Bakeries is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 1,198,000 in Lotus Bakeries on September 23, 2024 and sell it today you would lose (114,000) from holding Lotus Bakeries or give up 9.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Nextensa NV vs. Lotus Bakeries
Performance |
Timeline |
Nextensa NV |
Lotus Bakeries |
Nextensa and Lotus Bakeries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nextensa and Lotus Bakeries
The main advantage of trading using opposite Nextensa and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextensa 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.Nextensa vs. Home Invest Belgium | Nextensa vs. Ion Beam Applications | Nextensa vs. Vastned Retail Belgium | Nextensa vs. EVS Broadcast Equipment |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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