Correlation Between Lumia and Mfs Diversified

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

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

Diversification Opportunities for Lumia and Mfs Diversified

-0.66

Correlation Coefficient

Lumia  Mfs Diversified

Excellent diversification

The 3 months correlation between Lumia and Mfs is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Mfs Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Diversified Income 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 Mfs Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Diversified Income has no effect on the direction of Lumia i.e., Lumia and Mfs Diversified go up and down completely randomly.

Pair Corralation between Lumia and Mfs Diversified

Assuming the 90 days trading horizon Lumia is expected to generate 638.94 times more return on investment than Mfs Diversified. However, Lumia is 638.94 times more volatile than Mfs Diversified Income. It trades about 0.21 of its potential returns per unit of risk. Mfs Diversified Income is currently generating about -0.43 per unit of risk. If you would invest  0.00  in Lumia on October 10, 2024 and sell it today you would earn a total of  128.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Lumia  vs.  Mfs Diversified Income

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.

Mfs Diversified Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Diversified Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mfs Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and Mfs Diversified

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

The idea behind Lumia and Mfs Diversified Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.