Correlation Between Lumine and Generative

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

By analyzing existing cross correlation between Lumine Group and Generative AI Solutions, you can compare the effects of market volatilities on Lumine and Generative 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 Lumine with a short position of Generative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumine and Generative.

Diversification Opportunities for Lumine and Generative

-0.48

Correlation Coefficient

Lumine  Generative

Very good diversification

The 3 months correlation between Lumine and Generative is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lumine Group and Generative AI Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generative AI Solutions and Lumine 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 Lumine Group are associated (or correlated) with Generative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generative AI Solutions has no effect on the direction of Lumine i.e., Lumine and Generative go up and down completely randomly.

Pair Corralation between Lumine and Generative

Assuming the 90 days horizon Lumine is expected to generate 119.32 times less return on investment than Generative. But when comparing it to its historical volatility, Lumine Group is 11.61 times less risky than Generative. It trades about 0.01 of its potential returns per unit of risk. Generative AI Solutions is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8.68  in Generative AI Solutions on October 9, 2024 and sell it today you would lose (0.18) from holding Generative AI Solutions or give up 2.07% of portfolio value over 90 days.

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

Lumine Group  vs.  Generative AI Solutions

Lumine Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumine Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Lumine reported solid returns over the last few months and may actually be approaching a breakup point.

Generative AI Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Generative AI Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Generative reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumine and Generative

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

The idea behind Lumine Group and Generative AI Solutions 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 Global Correlations module to find global opportunities by holding instruments from different markets.