Correlation Between Lumia and Spruce Biosciences

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

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

Diversification Opportunities for Lumia and Spruce Biosciences

-0.58

Correlation Coefficient

Lumia  Spruce Biosciences

Excellent diversification

The 3 months correlation between Lumia and Spruce is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Spruce Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spruce Biosciences 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 Spruce Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spruce Biosciences has no effect on the direction of Lumia i.e., Lumia and Spruce Biosciences go up and down completely randomly.

Pair Corralation between Lumia and Spruce Biosciences

Assuming the 90 days trading horizon Lumia is expected to generate 28.18 times more return on investment than Spruce Biosciences. However, Lumia is 28.18 times more volatile than Spruce Biosciences. It trades about 0.12 of its potential returns per unit of risk. Spruce Biosciences is currently generating about -0.15 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  95.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Lumia  vs.  Spruce Biosciences

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.

Spruce Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spruce Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lumia and Spruce Biosciences

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

The idea behind Lumia and Spruce Biosciences 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.