Correlation Between Grab Holdings and Lumen Technologies

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

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

Diversification Opportunities for Grab Holdings and Lumen Technologies

0.14

Correlation Coefficient

Grab Holdings  Lumen Technologies

Average diversification

The 3 months correlation between Grab and Lumen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Grab Holdings and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies and Grab Holdings 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 Grab Holdings are associated (or correlated) with Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Grab Holdings i.e., Grab Holdings and Lumen Technologies go up and down completely randomly.

Pair Corralation between Grab Holdings and Lumen Technologies

Given the investment horizon of 90 days Grab Holdings is expected to generate 2.12 times less return on investment than Lumen Technologies. But when comparing it to its historical volatility, Grab Holdings is 2.73 times less risky than Lumen Technologies. It trades about 0.04 of its potential returns per unit of risk. Lumen Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Lumen Technologies on September 27, 2024 and sell it today you would earn a total of  24.00  from holding Lumen Technologies or generate 4.42% return on investment over 90 days.

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

Grab Holdings  vs.  Lumen Technologies

Grab Holdings

Risk-Adjusted Performance

11 of 100

Good

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

Lumen Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumen Technologies 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 primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Grab Holdings and Lumen Technologies

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

The idea behind Grab Holdings and Lumen Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.