Correlation Between Lumia and Ultrashort China

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

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

Diversification Opportunities for Lumia and Ultrashort China

0.87

Correlation Coefficient

Lumia  Ultrashort China

Very poor diversification

The 3 months correlation between Lumia and Ultrashort is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Ultrashort China Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort China Profund 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 Ultrashort China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort China Profund has no effect on the direction of Lumia i.e., Lumia and Ultrashort China go up and down completely randomly.

Pair Corralation between Lumia and Ultrashort China

Assuming the 90 days trading horizon Lumia is expected to under-perform the Ultrashort China. In addition to that, Lumia is 1.55 times more volatile than Ultrashort China Profund. It trades about -0.18 of its total potential returns per unit of risk. Ultrashort China Profund is currently generating about -0.15 per unit of volatility. If you would invest  360.00  in Ultrashort China Profund on December 23, 2024 and sell it today you would lose (144.00) from holding Ultrashort China Profund or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.85%
Values	Daily Returns

Lumia  vs.  Ultrashort China Profund

Lumia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Lumia shareholders.

Ultrashort China Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultrashort China Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Lumia and Ultrashort China

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

The idea behind Lumia and Ultrashort China Profund 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.