Correlation Between Lumia and INNOX Advanced

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

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

Diversification Opportunities for Lumia and INNOX Advanced

-0.62

Correlation Coefficient

Lumia  INNOX Advanced

Excellent diversification

The 3 months correlation between Lumia and INNOX is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and INNOX Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOX Advanced Materials 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 INNOX Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOX Advanced Materials has no effect on the direction of Lumia i.e., Lumia and INNOX Advanced go up and down completely randomly.

Pair Corralation between Lumia and INNOX Advanced

Assuming the 90 days trading horizon Lumia is expected to generate 90.06 times more return on investment than INNOX Advanced. However, Lumia is 90.06 times more volatile than INNOX Advanced Materials. It trades about 0.22 of its potential returns per unit of risk. INNOX Advanced Materials is currently generating about 0.42 per unit of risk. If you would invest  0.00  in Lumia on October 9, 2024 and sell it today you would earn a total of  145.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Lumia  vs.  INNOX Advanced Materials

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.

INNOX Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INNOX Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lumia and INNOX Advanced

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

The idea behind Lumia and INNOX Advanced Materials 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.