Correlation Between Lumia and Catalyst Metals

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

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

Diversification Opportunities for Lumia and Catalyst Metals

-0.55

Correlation Coefficient

Lumia  Catalyst Metals

Excellent diversification

The 3 months correlation between Lumia and Catalyst is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Lumia i.e., Lumia and Catalyst Metals go up and down completely randomly.

Pair Corralation between Lumia and Catalyst Metals

Assuming the 90 days trading horizon Lumia is expected to generate 23.47 times more return on investment than Catalyst Metals. However, Lumia is 23.47 times more volatile than Catalyst Metals Limited. It trades about 0.12 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about 0.01 per unit of risk. If you would invest  0.00  in Lumia on October 26, 2024 and sell it today you would earn a total of  95.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Lumia  vs.  Catalyst Metals 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.

Catalyst Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Catalyst Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lumia and Catalyst Metals

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

The idea behind Lumia and Catalyst Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.