Correlation Between Lumia and FACT II

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

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

Diversification Opportunities for Lumia and FACT II

-0.13

Correlation Coefficient

Lumia  FACT II

Good diversification

The 3 months correlation between Lumia and FACT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and FACT II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FACT II Acquisition 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 FACT II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FACT II Acquisition has no effect on the direction of Lumia i.e., Lumia and FACT II go up and down completely randomly.

Pair Corralation between Lumia and FACT II

Assuming the 90 days trading horizon Lumia is expected to generate 2.15 times less return on investment than FACT II. But when comparing it to its historical volatility, Lumia is 1.45 times less risky than FACT II. It trades about 0.21 of its potential returns per unit of risk. FACT II Acquisition is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  0.00  in FACT II Acquisition on October 10, 2024 and sell it today you would earn a total of  16.00  from holding FACT II Acquisition or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Lumia  vs.  FACT II Acquisition

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.

FACT II Acquisition

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FACT II Acquisition are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, FACT II showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and FACT II

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

The idea behind Lumia and FACT II Acquisition 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.