Correlation Between Materialise and LUMI GRUPPEN

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

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

Diversification Opportunities for Materialise and LUMI GRUPPEN

0.79

Correlation Coefficient

Materialise  LUMI GRUPPEN

Poor diversification

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

Pair Corralation between Materialise and LUMI GRUPPEN

Assuming the 90 days trading horizon Materialise is expected to generate 15.13 times less return on investment than LUMI GRUPPEN. But when comparing it to its historical volatility, Materialise NV is 1.45 times less risky than LUMI GRUPPEN. It trades about 0.02 of its potential returns per unit of risk. LUMI GRUPPEN AS is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  85.00  in LUMI GRUPPEN AS on September 26, 2024 and sell it today you would earn a total of  22.00  from holding LUMI GRUPPEN AS or generate 25.88% return on investment over 90 days.

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

Materialise NV  vs.  LUMI GRUPPEN AS

Materialise NV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

LUMI GRUPPEN AS

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LUMI GRUPPEN AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LUMI GRUPPEN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and LUMI GRUPPEN

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

The idea behind Materialise NV and LUMI GRUPPEN AS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.