Correlation Between Lumen Technologies and ZEN Graphene

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

By analyzing existing cross correlation between Lumen Technologies and ZEN Graphene Solutions, you can compare the effects of market volatilities on Lumen Technologies and ZEN Graphene 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 ZEN Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumen Technologies and ZEN Graphene.

Diversification Opportunities for Lumen Technologies and ZEN Graphene

0.35

Correlation Coefficient

Lumen Technologies  ZEN Graphene

Weak diversification

The 3 months correlation between Lumen and ZEN is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and ZEN Graphene Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZEN Graphene Solutions 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 ZEN Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZEN Graphene Solutions has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and ZEN Graphene go up and down completely randomly.

Pair Corralation between Lumen Technologies and ZEN Graphene

Given the investment horizon of 90 days Lumen Technologies is expected to under-perform the ZEN Graphene. But the stock apears to be less risky and, when comparing its historical volatility, Lumen Technologies is 1.21 times less risky than ZEN Graphene. The stock trades about -0.21 of its potential returns per unit of risk. The ZEN Graphene Solutions is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  119.00  in ZEN Graphene Solutions on November 28, 2024 and sell it today you would lose (19.00) from holding ZEN Graphene Solutions or give up 15.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lumen Technologies  vs.  ZEN Graphene Solutions

Lumen Technologies

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ZEN Graphene Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZEN Graphene Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Lumen Technologies and ZEN Graphene

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

The idea behind Lumen Technologies and ZEN Graphene Solutions 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.