Correlation Between Lumia and Airbus SE

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

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

Diversification Opportunities for Lumia and Airbus SE

0.81

Correlation Coefficient

Lumia  Airbus SE

Very poor diversification

The 3 months correlation between Lumia and Airbus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE 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 Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of Lumia i.e., Lumia and Airbus SE go up and down completely randomly.

Pair Corralation between Lumia and Airbus SE

Assuming the 90 days trading horizon Lumia is expected to generate 107.35 times more return on investment than Airbus SE. However, Lumia is 107.35 times more volatile than Airbus SE. It trades about 0.15 of its potential returns per unit of risk. Airbus SE is currently generating about 0.18 per unit of risk. If you would invest  0.00  in Lumia on October 10, 2024 and sell it today you would earn a total of  120.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Lumia  vs.  Airbus SE

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.

Airbus SE

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Airbus SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and Airbus SE

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

The idea behind Lumia and Airbus SE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.