Correlation Between Lumia and Itafos Corp

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

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

Diversification Opportunities for Lumia and Itafos Corp

0.43

Correlation Coefficient

Lumia  Itafos Corp

Very weak diversification

The 3 months correlation between Lumia and Itafos is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Itafos Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itafos Corp 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 Itafos Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itafos Corp has no effect on the direction of Lumia i.e., Lumia and Itafos Corp go up and down completely randomly.

Pair Corralation between Lumia and Itafos Corp

Assuming the 90 days trading horizon Lumia is expected to generate 13.59 times more return on investment than Itafos Corp. However, Lumia is 13.59 times more volatile than Itafos Corp. It trades about 0.04 of its potential returns per unit of risk. Itafos Corp is currently generating about 0.03 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	96.48%
Values	Daily Returns

Lumia  vs.  Itafos Corp

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.

Itafos Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Itafos Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Itafos Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lumia and Itafos Corp

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

The idea behind Lumia and Itafos Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.