Correlation Between E Life and Lumax International
Can any of the company-specific risk be diversified away by investing in both E Life and Lumax International 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 E Life and Lumax International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Life Mall Corp and Lumax International Corp, you can compare the effects of market volatilities on E Life and Lumax International 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 E Life with a short position of Lumax International. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Life and Lumax International.
Diversification Opportunities for E Life and Lumax International
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 6281 and Lumax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding E Life Mall Corp and Lumax International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumax International Corp and E Life 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 E Life Mall Corp are associated (or correlated) with Lumax International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumax International Corp has no effect on the direction of E Life i.e., E Life and Lumax International go up and down completely randomly.
Pair Corralation between E Life and Lumax International
Assuming the 90 days trading horizon E Life Mall Corp is expected to under-perform the Lumax International. But the stock apears to be less risky and, when comparing its historical volatility, E Life Mall Corp is 3.02 times less risky than Lumax International. The stock trades about -0.45 of its potential returns per unit of risk. The Lumax International Corp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 11,150 in Lumax International Corp on November 5, 2024 and sell it today you would lose (350.00) from holding Lumax International Corp or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Life Mall Corp vs. Lumax International Corp
Performance |
| Timeline |
| E Life Mall |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Lumax International Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
E Life and Lumax International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Life and Lumax International
The main advantage of trading using opposite E Life and Lumax International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Life position performs unexpectedly, Lumax International 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 Lumax International will offset losses from the drop in Lumax International's long position.The idea behind E Life Mall Corp and Lumax International Corp 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.Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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