Correlation Between Lumia and WesCan Energy

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

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

Diversification Opportunities for Lumia and WesCan Energy

-0.72

Correlation Coefficient

Lumia  WesCan Energy

Pay attention - limited upside

The 3 months correlation between Lumia and WesCan is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and WesCan Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesCan Energy Corp 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 WesCan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesCan Energy Corp has no effect on the direction of Lumia i.e., Lumia and WesCan Energy go up and down completely randomly.

Pair Corralation between Lumia and WesCan Energy

Assuming the 90 days trading horizon Lumia is expected to under-perform the WesCan Energy. In addition to that, Lumia is 1.45 times more volatile than WesCan Energy Corp. It trades about -0.37 of its total potential returns per unit of risk. WesCan Energy Corp is currently generating about 0.02 per unit of volatility. If you would invest  8.00  in WesCan Energy Corp on October 12, 2024 and sell it today you would earn a total of  0.00  from holding WesCan Energy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Lumia  vs.  WesCan Energy Corp

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.

WesCan Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WesCan Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WesCan Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lumia and WesCan Energy

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

The idea behind Lumia and WesCan Energy Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.