Correlation Between Lumia and Invesco EURO

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

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

Diversification Opportunities for Lumia and Invesco EURO

0.24

Correlation Coefficient

Lumia  Invesco EURO

Modest diversification

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

Pair Corralation between Lumia and Invesco EURO

Assuming the 90 days trading horizon Lumia is expected to generate 118.25 times more return on investment than Invesco EURO. However, Lumia is 118.25 times more volatile than Invesco EURO STOXX. It trades about 0.12 of its potential returns per unit of risk. Invesco EURO STOXX is currently generating about 0.06 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	Very Weak
Accuracy	96.83%
Values	Daily Returns

Lumia  vs.  Invesco EURO STOXX

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.

Invesco EURO STOXX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EURO STOXX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco EURO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lumia and Invesco EURO

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

The idea behind Lumia and Invesco EURO STOXX 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.