Correlation Between CHINA EAST and LUMI GRUPPEN

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

By analyzing existing cross correlation between CHINA EAST ED and LUMI GRUPPEN AS, you can compare the effects of market volatilities on CHINA EAST and LUMI GRUPPEN 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 CHINA EAST with a short position of LUMI GRUPPEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EAST and LUMI GRUPPEN.

Diversification Opportunities for CHINA EAST and LUMI GRUPPEN

-0.07

Correlation Coefficient

CHINA EAST  LUMI GRUPPEN

Good diversification

The 3 months correlation between CHINA and LUMI is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EAST ED and LUMI GRUPPEN AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUMI GRUPPEN AS and CHINA EAST 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 CHINA EAST ED are associated (or correlated) with LUMI GRUPPEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUMI GRUPPEN AS has no effect on the direction of CHINA EAST i.e., CHINA EAST and LUMI GRUPPEN go up and down completely randomly.

Pair Corralation between CHINA EAST and LUMI GRUPPEN

Assuming the 90 days horizon CHINA EAST ED is expected to under-perform the LUMI GRUPPEN. But the stock apears to be less risky and, when comparing its historical volatility, CHINA EAST ED is 1.99 times less risky than LUMI GRUPPEN. The stock trades about -0.16 of its potential returns per unit of risk. The LUMI GRUPPEN AS is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  86.00  in LUMI GRUPPEN AS on October 5, 2024 and sell it today you would earn a total of  20.00  from holding LUMI GRUPPEN AS or generate 23.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

CHINA EAST ED  vs.  LUMI GRUPPEN AS

CHINA EAST ED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EAST ED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LUMI GRUPPEN AS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LUMI GRUPPEN AS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, LUMI GRUPPEN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EAST and LUMI GRUPPEN

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

The idea behind CHINA EAST ED and LUMI GRUPPEN AS 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.