Correlation Between Sipef NV and Lotus Bakeries

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

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

Diversification Opportunities for Sipef NV and Lotus Bakeries

-0.03

Correlation Coefficient

Sipef NV  Lotus Bakeries

Good diversification

The 3 months correlation between Sipef and Lotus is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sipef NV and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Sipef NV 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 Sipef 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 Sipef NV i.e., Sipef NV and Lotus Bakeries go up and down completely randomly.

Pair Corralation between Sipef NV and Lotus Bakeries

Assuming the 90 days trading horizon Sipef NV is expected to generate 0.73 times more return on investment than Lotus Bakeries. However, Sipef NV is 1.37 times less risky than Lotus Bakeries. It trades about 0.05 of its potential returns per unit of risk. Lotus Bakeries is currently generating about -0.18 per unit of risk. If you would invest  5,340  in Sipef NV on September 13, 2024 and sell it today you would earn a total of  140.00  from holding Sipef NV or generate 2.62% return on investment over 90 days.

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

Sipef NV  vs.  Lotus Bakeries

Sipef NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sipef NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Sipef NV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Lotus Bakeries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Bakeries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sipef NV and Lotus Bakeries

The main advantage of trading using opposite Sipef NV and Lotus Bakeries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sipef NV 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.

The idea behind Sipef NV and Lotus Bakeries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..