Correlation Between Tubize Fin and Lotus Bakeries

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

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

Diversification Opportunities for Tubize Fin and Lotus Bakeries

0.48

Correlation Coefficient

Tubize Fin  Lotus Bakeries

Very weak diversification

The 3 months correlation between Tubize and Lotus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tubize Fin and Lotus Bakeries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Bakeries and Tubize Fin 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 Tubize Fin 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 Tubize Fin i.e., Tubize Fin and Lotus Bakeries go up and down completely randomly.

Pair Corralation between Tubize Fin and Lotus Bakeries

Assuming the 90 days trading horizon Tubize Fin is expected to generate 1.47 times more return on investment than Lotus Bakeries. However, Tubize Fin is 1.47 times more volatile than Lotus Bakeries. It trades about 0.11 of its potential returns per unit of risk. Lotus Bakeries is currently generating about -0.02 per unit of risk. If you would invest  12,340  in Tubize Fin on September 5, 2024 and sell it today you would earn a total of  1,500  from holding Tubize Fin or generate 12.16% return on investment over 90 days.

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

Tubize Fin  vs.  Lotus Bakeries

Tubize Fin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tubize Fin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Tubize Fin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 relatively invariable basic indicators, Lotus Bakeries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Tubize Fin and Lotus Bakeries

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

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.