Correlation Between Lumia and Barings Corporate

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

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

Diversification Opportunities for Lumia and Barings Corporate

0.6

Correlation Coefficient

Lumia  Barings Corporate

Poor diversification

The 3 months correlation between Lumia and Barings is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Barings Corporate Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Corporate 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 Barings Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Corporate has no effect on the direction of Lumia i.e., Lumia and Barings Corporate go up and down completely randomly.

Pair Corralation between Lumia and Barings Corporate

Assuming the 90 days trading horizon Lumia is expected to under-perform the Barings Corporate. In addition to that, Lumia is 4.02 times more volatile than Barings Corporate Investors. It trades about -0.27 of its total potential returns per unit of risk. Barings Corporate Investors is currently generating about 0.25 per unit of volatility. If you would invest  1,963  in Barings Corporate Investors on October 24, 2024 and sell it today you would earn a total of  130.00  from holding Barings Corporate Investors or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Lumia  vs.  Barings Corporate Investors

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.

Barings Corporate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Corporate Investors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Barings Corporate may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lumia and Barings Corporate

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

The idea behind Lumia and Barings Corporate Investors 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.