Correlation Between Lumia and 191216CY4

Can any of the company-specific risk be diversified away by investing in both Lumia and 191216CY4 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 191216CY4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lumia and COCA COLA CO, you can compare the effects of market volatilities on Lumia and 191216CY4 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 191216CY4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and 191216CY4.

Diversification Opportunities for Lumia and 191216CY4

-0.43

Correlation Coefficient

Lumia  191216CY4

Very good diversification

The 3 months correlation between Lumia and 191216CY4 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216CY4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Lumia i.e., Lumia and 191216CY4 go up and down completely randomly.

Pair Corralation between Lumia and 191216CY4

Assuming the 90 days trading horizon Lumia is expected to generate 56.97 times more return on investment than 191216CY4. However, Lumia is 56.97 times more volatile than COCA COLA CO. It trades about 0.12 of its potential returns per unit of risk. COCA COLA CO is currently generating about -0.01 per unit of risk. If you would invest  0.00  in Lumia on October 25, 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	85.71%
Values	Daily Returns

Lumia  vs.  COCA COLA CO

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.

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216CY4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and 191216CY4

The main advantage of trading using opposite Lumia and 191216CY4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, 191216CY4 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 191216CY4 will offset losses from the drop in 191216CY4's long position.

The idea behind Lumia and COCA COLA CO 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.