Correlation Between Lumia and GB Group
Can any of the company-specific risk be diversified away by investing in both Lumia and GB Group 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 Lumia and GB Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and GB Group plc, you can compare the effects of market volatilities on Lumia and GB Group 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 Lumia with a short position of GB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and GB Group.
Diversification Opportunities for Lumia and GB Group
Average diversification
The 3 months correlation between Lumia and 0GB is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and GB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Group plc and Lumia 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 Lumia are associated (or correlated) with GB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Group plc has no effect on the direction of Lumia i.e., Lumia and GB Group go up and down completely randomly.
Pair Corralation between Lumia and GB Group
Assuming the 90 days trading horizon Lumia is expected to under-perform the GB Group. In addition to that, Lumia is 3.87 times more volatile than GB Group plc. It trades about -0.31 of its total potential returns per unit of risk. GB Group plc is currently generating about -0.12 per unit of volatility. If you would invest 408.00 in GB Group plc on October 24, 2024 and sell it today you would lose (14.00) from holding GB Group plc or give up 3.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Lumia vs. GB Group plc
Performance |
| Timeline |
| Lumia |
| GB Group plc |
Lumia and GB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and GB Group
The main advantage of trading using opposite Lumia and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, GB Group 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 GB Group will offset losses from the drop in GB Group's long position.The idea behind Lumia and GB Group 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.| GB Group vs. AGNC INVESTMENT | GB Group vs. Nishi Nippon Railroad Co | GB Group vs. WisdomTree Investments | GB Group vs. Apollo Investment Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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