Correlation Between Lumia and SecureTech Innovations

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

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

Diversification Opportunities for Lumia and SecureTech Innovations

-0.05

Correlation Coefficient

Lumia  SecureTech Innovations

Good diversification

The 3 months correlation between Lumia and SecureTech is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and SecureTech Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SecureTech Innovations 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 SecureTech Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SecureTech Innovations has no effect on the direction of Lumia i.e., Lumia and SecureTech Innovations go up and down completely randomly.

Pair Corralation between Lumia and SecureTech Innovations

Assuming the 90 days trading horizon Lumia is expected to generate 4.59 times more return on investment than SecureTech Innovations. However, Lumia is 4.59 times more volatile than SecureTech Innovations. It trades about 0.15 of its potential returns per unit of risk. SecureTech Innovations is currently generating about 0.12 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  145.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Lumia  vs.  SecureTech Innovations

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.

SecureTech Innovations

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SecureTech Innovations are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, SecureTech Innovations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and SecureTech Innovations

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

The idea behind Lumia and SecureTech Innovations 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.