Correlation Between Lumia and 1x Short

Can any of the company-specific risk be diversified away by investing in both Lumia and 1x Short 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 1x Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lumia and 1x Short VIX, you can compare the effects of market volatilities on Lumia and 1x Short 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 1x Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and 1x Short.

Diversification Opportunities for Lumia and 1x Short

0.1

Correlation Coefficient

Lumia  1x Short

Average diversification

The 3 months correlation between Lumia and SVIX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and 1x Short VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1x Short VIX 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 1x Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1x Short VIX has no effect on the direction of Lumia i.e., Lumia and 1x Short go up and down completely randomly.

Pair Corralation between Lumia and 1x Short

Assuming the 90 days trading horizon Lumia is expected to generate 34.92 times more return on investment than 1x Short. However, Lumia is 34.92 times more volatile than 1x Short VIX. It trades about 0.21 of its potential returns per unit of risk. 1x Short VIX is currently generating about -0.06 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 Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Lumia  vs.   1x Short VIX

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.

1x Short VIX

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1x Short VIX are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, 1x Short showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumia and 1x Short

The main advantage of trading using opposite Lumia and 1x Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, 1x Short 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 1x Short will offset losses from the drop in 1x Short's long position.

The idea behind Lumia and 1x Short VIX 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.