Correlation Between Phala Network and Lumia

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

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

Diversification Opportunities for Phala Network and Lumia

0.58

Correlation Coefficient

Phala Network  Lumia

Very weak diversification

The 3 months correlation between Phala and Lumia is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Phala Network and Lumia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumia and Phala Network 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 Phala Network are associated (or correlated) with Lumia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumia has no effect on the direction of Phala Network i.e., Phala Network and Lumia go up and down completely randomly.

Pair Corralation between Phala Network and Lumia

Assuming the 90 days trading horizon Phala Network is expected to generate 7.39 times less return on investment than Lumia. But when comparing it to its historical volatility, Phala Network is 7.25 times less risky than Lumia. It trades about 0.2 of its potential returns per unit of risk. Lumia is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Lumia on October 10, 2024 and sell it today you would earn a total of  128.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

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

Phala Network  vs.  Lumia

Phala Network

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Phala Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Phala Network and Lumia

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

The idea behind Phala Network and Lumia 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.