Correlation Between Lumia and IShares Core

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

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

Diversification Opportunities for Lumia and IShares Core

0.72

Correlation Coefficient

Lumia  IShares Core

Poor diversification

The 3 months correlation between Lumia and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and iShares Core DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core DAX 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core DAX has no effect on the direction of Lumia i.e., Lumia and IShares Core go up and down completely randomly.

Pair Corralation between Lumia and IShares Core

Assuming the 90 days trading horizon Lumia is expected to generate 125.42 times more return on investment than IShares Core. However, Lumia is 125.42 times more volatile than iShares Core DAX. It trades about 0.12 of its potential returns per unit of risk. iShares Core DAX is currently generating about 0.17 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 Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Lumia  vs.  iShares Core DAX

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.

iShares Core DAX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core DAX are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lumia and IShares Core

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

The idea behind Lumia and iShares Core DAX 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.