Correlation Between Lumia and Whitehaven Coal

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

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

Diversification Opportunities for Lumia and Whitehaven Coal

0.65

Correlation Coefficient

Lumia  Whitehaven Coal

Poor diversification

The 3 months correlation between Lumia and Whitehaven is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Lumia i.e., Lumia and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Lumia and Whitehaven Coal

Assuming the 90 days trading horizon Lumia is expected to under-perform the Whitehaven Coal. In addition to that, Lumia is 3.02 times more volatile than Whitehaven Coal. It trades about -0.2 of its total potential returns per unit of risk. Whitehaven Coal is currently generating about -0.01 per unit of volatility. If you would invest  595.00  in Whitehaven Coal on December 24, 2024 and sell it today you would lose (23.00) from holding Whitehaven Coal or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Lumia  vs.  Whitehaven Coal

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.

Whitehaven Coal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Whitehaven Coal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lumia and Whitehaven Coal

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

The idea behind Lumia and Whitehaven Coal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.