Correlation Between Lumia and Amg Frontier

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

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

Diversification Opportunities for Lumia and Amg Frontier

-0.54

Correlation Coefficient

Lumia  Amg Frontier

Excellent diversification

The 3 months correlation between Lumia and Amg is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Amg Frontier Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Frontier Small 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 Amg Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Frontier Small has no effect on the direction of Lumia i.e., Lumia and Amg Frontier go up and down completely randomly.

Pair Corralation between Lumia and Amg Frontier

Assuming the 90 days trading horizon Lumia is expected to generate 40.29 times more return on investment than Amg Frontier. However, Lumia is 40.29 times more volatile than Amg Frontier Small. It trades about 0.06 of its potential returns per unit of risk. Amg Frontier Small is currently generating about 0.03 per unit of risk. If you would invest  0.00  in Lumia on October 9, 2024 and sell it today you would earn a total of  128.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.48%
Values	Daily Returns

Lumia  vs.  Amg Frontier Small

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.

Amg Frontier Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg Frontier Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amg Frontier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and Amg Frontier

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

The idea behind Lumia and Amg Frontier Small 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.