Correlation Between Lumia and Fidelity Mid

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

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

Diversification Opportunities for Lumia and Fidelity Mid

-0.55

Correlation Coefficient

Lumia  Fidelity Mid

Excellent diversification

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

Pair Corralation between Lumia and Fidelity Mid

Assuming the 90 days trading horizon Lumia is expected to under-perform the Fidelity Mid. In addition to that, Lumia is 6.84 times more volatile than Fidelity Mid Cap. It trades about -0.32 of its total potential returns per unit of risk. Fidelity Mid Cap is currently generating about 0.2 per unit of volatility. If you would invest  1,241  in Fidelity Mid Cap on October 25, 2024 and sell it today you would earn a total of  41.00  from holding Fidelity Mid Cap or generate 3.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Lumia  vs.  Fidelity Mid Cap

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.

Fidelity Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Lumia and Fidelity Mid

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

The idea behind Lumia and Fidelity Mid Cap 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.