Correlation Between Lumia and NISOURCE

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

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

Diversification Opportunities for Lumia and NISOURCE

0.07

Correlation Coefficient

Lumia  NISOURCE

Significant diversification

The 3 months correlation between Lumia and NISOURCE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of Lumia i.e., Lumia and NISOURCE go up and down completely randomly.

Pair Corralation between Lumia and NISOURCE

Assuming the 90 days trading horizon Lumia is expected to under-perform the NISOURCE. In addition to that, Lumia is 25.85 times more volatile than NISOURCE FIN P. It trades about -0.18 of its total potential returns per unit of risk. NISOURCE FIN P is currently generating about -0.06 per unit of volatility. If you would invest  9,717  in NISOURCE FIN P on December 25, 2024 and sell it today you would lose (89.00) from holding NISOURCE FIN P or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

Lumia  vs.  NISOURCE FIN P

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.

NISOURCE FIN P

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Lumia and NISOURCE

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

The idea behind Lumia and NISOURCE FIN 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.