Correlation Between Lumen Technologies and Liberty Latin

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

By analyzing existing cross correlation between Lumen Technologies and Liberty Latin America, you can compare the effects of market volatilities on Lumen Technologies and Liberty Latin 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 Lumen Technologies with a short position of Liberty Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumen Technologies and Liberty Latin.

Diversification Opportunities for Lumen Technologies and Liberty Latin

-0.04

Correlation Coefficient

Lumen Technologies  Liberty Latin

Good diversification

The 3 months correlation between Lumen and Liberty is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America and Lumen Technologies 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 Lumen Technologies are associated (or correlated) with Liberty Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and Liberty Latin go up and down completely randomly.

Pair Corralation between Lumen Technologies and Liberty Latin

Given the investment horizon of 90 days Lumen Technologies is expected to generate 2.56 times more return on investment than Liberty Latin. However, Lumen Technologies is 2.56 times more volatile than Liberty Latin America. It trades about 0.06 of its potential returns per unit of risk. Liberty Latin America is currently generating about 0.0 per unit of risk. If you would invest  259.00  in Lumen Technologies on October 5, 2024 and sell it today you would earn a total of  319.00  from holding Lumen Technologies or generate 123.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lumen Technologies  vs.  Liberty Latin America

Lumen Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Lumen Technologies is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Liberty Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lumen Technologies and Liberty Latin

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

The idea behind Lumen Technologies and Liberty Latin America 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.