Correlation Between Lumia and UBS Institutional

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

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

Diversification Opportunities for Lumia and UBS Institutional

0.74

Correlation Coefficient

Lumia  UBS Institutional

Poor diversification

The 3 months correlation between Lumia and UBS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and UBS Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Institutional and Lumia 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 Lumia are associated (or correlated) with UBS Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Institutional has no effect on the direction of Lumia i.e., Lumia and UBS Institutional go up and down completely randomly.

Pair Corralation between Lumia and UBS Institutional

Assuming the 90 days trading horizon Lumia is expected to generate 141.67 times more return on investment than UBS Institutional. However, Lumia is 141.67 times more volatile than UBS Institutional. It trades about 0.1 of its potential returns per unit of risk. UBS Institutional is currently generating about 0.16 per unit of risk. If you would invest  0.00  in Lumia on October 24, 2024 and sell it today you would earn a total of  101.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.94%
Values	Daily Returns

Lumia  vs.  UBS Institutional

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

UBS Institutional

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Institutional are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly abnormal forward indicators, UBS Institutional may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lumia and UBS Institutional

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

The idea behind Lumia and UBS Institutional 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.