Correlation Between Blue Bird and Lotus Technology

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

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

Diversification Opportunities for Blue Bird and Lotus Technology

0.26

Correlation Coefficient

Blue Bird  Lotus Technology

Modest diversification

The 3 months correlation between Blue and Lotus is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Lotus Technology Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology Warrants and Blue Bird 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 Blue Bird Corp are associated (or correlated) with Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology Warrants has no effect on the direction of Blue Bird i.e., Blue Bird and Lotus Technology go up and down completely randomly.

Pair Corralation between Blue Bird and Lotus Technology

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 0.46 times more return on investment than Lotus Technology. However, Blue Bird Corp is 2.15 times less risky than Lotus Technology. It trades about 0.08 of its potential returns per unit of risk. Lotus Technology Warrants is currently generating about -0.11 per unit of risk. If you would invest  1,927  in Blue Bird Corp on January 28, 2024 and sell it today you would earn a total of  1,470  from holding Blue Bird Corp or generate 76.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	18.55%
Values	Daily Returns

Blue Bird Corp  vs.  Lotus Technology Warrants

Blue Bird Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Blue Bird exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lotus Technology Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Technology Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Blue Bird and Lotus Technology

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

The idea behind Blue Bird Corp and Lotus Technology Warrants 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.