Correlation Between Lumia and Crescent Steel

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

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

Diversification Opportunities for Lumia and Crescent Steel

-0.33

Correlation Coefficient

Lumia  Crescent Steel

Very good diversification

The 3 months correlation between Lumia and Crescent is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied 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 Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Lumia i.e., Lumia and Crescent Steel go up and down completely randomly.

Pair Corralation between Lumia and Crescent Steel

Assuming the 90 days trading horizon Lumia is expected to under-perform the Crescent Steel. In addition to that, Lumia is 1.39 times more volatile than Crescent Steel Allied. It trades about -0.28 of its total potential returns per unit of risk. Crescent Steel Allied is currently generating about 0.0 per unit of volatility. If you would invest  10,763  in Crescent Steel Allied on October 23, 2024 and sell it today you would lose (174.00) from holding Crescent Steel Allied or give up 1.62% of portfolio value over 90 days.

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

Lumia  vs.  Crescent Steel Allied

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.

Crescent Steel Allied

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crescent Steel Allied has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lumia and Crescent Steel

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

The idea behind Lumia and Crescent Steel Allied 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.