Correlation Between Unum and Luxfer Holdings

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

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

Diversification Opportunities for Unum and Luxfer Holdings

0.01

Correlation Coefficient

Unum  Luxfer Holdings

Significant diversification

The 3 months correlation between Unum and Luxfer is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Unum 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 Unum Group are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Unum i.e., Unum and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Unum and Luxfer Holdings

Given the investment horizon of 90 days Unum Group is expected to generate 0.29 times more return on investment than Luxfer Holdings. However, Unum Group is 3.5 times less risky than Luxfer Holdings. It trades about -0.54 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about -0.31 per unit of risk. If you would invest  2,505  in Unum Group on October 3, 2024 and sell it today you would lose (143.00) from holding Unum Group or give up 5.71% of portfolio value over 90 days.

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

Unum Group  vs.  Luxfer Holdings PLC

Unum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Unum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Luxfer Holdings PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Unum and Luxfer Holdings

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

The idea behind Unum Group and Luxfer Holdings PLC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.