Correlation Between Lotes and Thye Ming

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

By analyzing existing cross correlation between Lotes Co and Thye Ming Industrial, you can compare the effects of market volatilities on Lotes and Thye Ming 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 Lotes with a short position of Thye Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lotes and Thye Ming.

Diversification Opportunities for Lotes and Thye Ming

0.79

Correlation Coefficient

Lotes  Thye Ming

Poor diversification

The 3 months correlation between Lotes and Thye is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Thye Ming Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thye Ming Industrial and Lotes 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 Lotes Co are associated (or correlated) with Thye Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thye Ming Industrial has no effect on the direction of Lotes i.e., Lotes and Thye Ming go up and down completely randomly.

Pair Corralation between Lotes and Thye Ming

Assuming the 90 days trading horizon Lotes Co is expected to generate 2.31 times more return on investment than Thye Ming. However, Lotes is 2.31 times more volatile than Thye Ming Industrial. It trades about 0.24 of its potential returns per unit of risk. Thye Ming Industrial is currently generating about 0.0 per unit of risk. If you would invest  102,500  in Lotes Co on January 29, 2024 and sell it today you would earn a total of  43,000  from holding Lotes Co or generate 41.95% return on investment over 90 days.

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

Lotes Co  vs.  Thye Ming Industrial

Lotes

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes showed solid returns over the last few months and may actually be approaching a breakup point.

Thye Ming Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thye Ming Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Thye Ming may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Lotes and Thye Ming

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

The idea behind Lotes Co and Thye Ming Industrial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.