Correlation Between Lumia and CARRIER

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

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

Diversification Opportunities for Lumia and CARRIER

-0.58

Correlation Coefficient

Lumia  CARRIER

Excellent diversification

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

Pair Corralation between Lumia and CARRIER

Assuming the 90 days trading horizon Lumia is expected to generate 87.27 times more return on investment than CARRIER. However, Lumia is 87.27 times more volatile than CARRIER GLOBAL P. It trades about 0.12 of its potential returns per unit of risk. CARRIER GLOBAL P is currently generating about -0.15 per unit of risk. If you would invest  0.00  in Lumia on October 23, 2024 and sell it today you would earn a total of  100.00  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	90.48%
Values	Daily Returns

Lumia  vs.  CARRIER GLOBAL P

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.

CARRIER GLOBAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond'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 CARRIER GLOBAL P investors.

Pair Trading with Lumia and CARRIER

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

The idea behind Lumia and CARRIER GLOBAL P 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 Stocks Directory module to find actively traded stocks across global markets.