Correlation Between Lumia and Performance Trust

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

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

Diversification Opportunities for Lumia and Performance Trust

0.24

Correlation Coefficient

Lumia  Performance Trust

Modest diversification

The 3 months correlation between Lumia and Performance is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Performance Trust Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust Credit 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust Credit has no effect on the direction of Lumia i.e., Lumia and Performance Trust go up and down completely randomly.

Pair Corralation between Lumia and Performance Trust

Assuming the 90 days trading horizon Lumia is expected to generate 1245.99 times more return on investment than Performance Trust. However, Lumia is 1245.99 times more volatile than Performance Trust Credit. It trades about 0.2 of its potential returns per unit of risk. Performance Trust Credit is currently generating about -0.37 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  117.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Lumia  vs.  Performance Trust Credit

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.

Performance Trust Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Performance Trust Credit has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Performance Trust 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 Performance Trust

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

The idea behind Lumia and Performance Trust Credit 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.