Correlation Between Lumia and XCHG Limited

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

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

Diversification Opportunities for Lumia and XCHG Limited

-0.44

Correlation Coefficient

Lumia  XCHG Limited

Very good diversification

The 3 months correlation between Lumia and XCHG is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American 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 XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Lumia i.e., Lumia and XCHG Limited go up and down completely randomly.

Pair Corralation between Lumia and XCHG Limited

Assuming the 90 days trading horizon Lumia is expected to generate 1.72 times less return on investment than XCHG Limited. But when comparing it to its historical volatility, Lumia is 1.24 times less risky than XCHG Limited. It trades about 0.08 of its potential returns per unit of risk. XCHG Limited American is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in XCHG Limited American on October 10, 2024 and sell it today you would earn a total of  208.00  from holding XCHG Limited American or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.14%
Values	Daily Returns

Lumia  vs.  XCHG Limited American

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.

XCHG Limited American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, XCHG Limited is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lumia and XCHG Limited

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

The idea behind Lumia and XCHG Limited American 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.