Correlation Between Lumia and CENTR Brands

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

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

Diversification Opportunities for Lumia and CENTR Brands

0.02

Correlation Coefficient

Lumia  CENTR Brands

Significant diversification

The 3 months correlation between Lumia and CENTR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and CENTR Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTR Brands Corp 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 CENTR Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTR Brands Corp has no effect on the direction of Lumia i.e., Lumia and CENTR Brands go up and down completely randomly.

Pair Corralation between Lumia and CENTR Brands

Assuming the 90 days trading horizon Lumia is expected to generate 2.3 times less return on investment than CENTR Brands. But when comparing it to its historical volatility, Lumia is 1.62 times less risky than CENTR Brands. It trades about 0.22 of its potential returns per unit of risk. CENTR Brands Corp is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2.00  in CENTR Brands Corp on October 9, 2024 and sell it today you would earn a total of  3.06  from holding CENTR Brands Corp or generate 153.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Lumia  vs.  CENTR Brands Corp

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.

CENTR Brands Corp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days CENTR Brands Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, CENTR Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and CENTR Brands

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

The idea behind Lumia and CENTR Brands Corp 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.