Correlation Between Lumia and Compagnie

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

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

Diversification Opportunities for Lumia and Compagnie

-0.17

Correlation Coefficient

Lumia  Compagnie

Good diversification

The 3 months correlation between Lumia and Compagnie is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Lumia i.e., Lumia and Compagnie go up and down completely randomly.

Pair Corralation between Lumia and Compagnie

Assuming the 90 days trading horizon Lumia is expected to under-perform the Compagnie. In addition to that, Lumia is 4.19 times more volatile than Compagnie de Saint Gobain. It trades about -0.27 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.1 per unit of volatility. If you would invest  1,787  in Compagnie de Saint Gobain on October 24, 2024 and sell it today you would earn a total of  45.00  from holding Compagnie de Saint Gobain or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Lumia  vs.  Compagnie de Saint Gobain

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.

Compagnie de Saint

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Compagnie is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and Compagnie

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

The idea behind Lumia and Compagnie de Saint Gobain 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.