Correlation Between Lumia and First Horizon

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

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

Diversification Opportunities for Lumia and First Horizon

0.59

Correlation Coefficient

Lumia  First Horizon

Very weak diversification

The 3 months correlation between Lumia and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Lumia i.e., Lumia and First Horizon go up and down completely randomly.

Pair Corralation between Lumia and First Horizon

Assuming the 90 days trading horizon Lumia is expected to generate 282.01 times more return on investment than First Horizon. However, Lumia is 282.01 times more volatile than First Horizon. It trades about 0.12 of its potential returns per unit of risk. First Horizon is currently generating about 0.02 per unit of risk. If you would invest  0.00  in Lumia on October 11, 2024 and sell it today you would earn a total of  120.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Lumia  vs.  First Horizon

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.

First Horizon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Horizon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lumia and First Horizon

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

The idea behind Lumia and First Horizon 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.