Correlation Between Lumine and Topicus

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

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

Diversification Opportunities for Lumine and Topicus

-0.25

Correlation Coefficient

Lumine  Topicus

Very good diversification

The 3 months correlation between Lumine and Topicus is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lumine Group and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus 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 Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of Lumine i.e., Lumine and Topicus go up and down completely randomly.

Pair Corralation between Lumine and Topicus

Assuming the 90 days horizon Lumine is expected to generate 5.81 times less return on investment than Topicus. In addition to that, Lumine is 1.07 times more volatile than Topicus. It trades about 0.02 of its total potential returns per unit of risk. Topicus is currently generating about 0.14 per unit of volatility. If you would invest  12,180  in Topicus on December 29, 2024 and sell it today you would earn a total of  2,305  from holding Topicus or generate 18.92% return on investment over 90 days.

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

Lumine Group  vs.  Topicus

Lumine Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lumine Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lumine is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Topicus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Topicus are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Topicus showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumine and Topicus

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

The idea behind Lumine Group and Topicus 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.