Correlation Between Lumia and Plazza AG

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

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

Diversification Opportunities for Lumia and Plazza AG

0.6

Correlation Coefficient

Lumia  Plazza AG

Poor diversification

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

Pair Corralation between Lumia and Plazza AG

Assuming the 90 days trading horizon Lumia is expected to generate 239.05 times more return on investment than Plazza AG. However, Lumia is 239.05 times more volatile than Plazza AG. It trades about 0.12 of its potential returns per unit of risk. Plazza AG is currently generating about 0.16 per unit of risk. If you would invest  0.00  in Lumia on October 24, 2024 and sell it today you would earn a total of  101.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Lumia  vs.  Plazza AG

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.

Plazza AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plazza AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Plazza AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lumia and Plazza AG

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

The idea behind Lumia and Plazza AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.