Correlation Between Lumia and Azad Engineering

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

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

Diversification Opportunities for Lumia and Azad Engineering

0.57

Correlation Coefficient

Lumia  Azad Engineering

Very weak diversification

The 3 months correlation between Lumia and Azad is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Azad Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azad Engineering 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 Azad Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azad Engineering has no effect on the direction of Lumia i.e., Lumia and Azad Engineering go up and down completely randomly.

Pair Corralation between Lumia and Azad Engineering

Assuming the 90 days trading horizon Lumia is expected to generate 42.82 times more return on investment than Azad Engineering. However, Lumia is 42.82 times more volatile than Azad Engineering Limited. It trades about 0.12 of its potential returns per unit of risk. Azad Engineering Limited is currently generating about 0.12 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 Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Lumia  vs.  Azad Engineering Limited

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.

Azad Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azad Engineering Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Azad Engineering unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and Azad Engineering

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

The idea behind Lumia and Azad Engineering Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.