Correlation Between Lumia and Solarmax Technology

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

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

Diversification Opportunities for Lumia and Solarmax Technology

0.54

Correlation Coefficient

Lumia  Solarmax Technology

Very weak diversification

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

Pair Corralation between Lumia and Solarmax Technology

Assuming the 90 days trading horizon Lumia is expected to generate 13.92 times more return on investment than Solarmax Technology. However, Lumia is 13.92 times more volatile than Solarmax Technology Common. It trades about 0.14 of its potential returns per unit of risk. Solarmax Technology Common is currently generating about 0.17 per unit of risk. If you would invest  0.00  in Lumia on October 26, 2024 and sell it today you would earn a total of  95.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.7%
Values	Daily Returns

Lumia  vs.  Solarmax Technology Common

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.

Solarmax Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solarmax Technology Common are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Solarmax Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and Solarmax Technology

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

The idea behind Lumia and Solarmax Technology Common 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.