Correlation Between Lumia and AnaptysBio
Can any of the company-specific risk be diversified away by investing in both Lumia and AnaptysBio 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 AnaptysBio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and AnaptysBio, you can compare the effects of market volatilities on Lumia and AnaptysBio 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 AnaptysBio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and AnaptysBio.
Diversification Opportunities for Lumia and AnaptysBio
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lumia and AnaptysBio is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and AnaptysBio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AnaptysBio 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 AnaptysBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AnaptysBio has no effect on the direction of Lumia i.e., Lumia and AnaptysBio go up and down completely randomly.
Pair Corralation between Lumia and AnaptysBio
Assuming the 90 days trading horizon Lumia is expected to under-perform the AnaptysBio. In addition to that, Lumia is 1.61 times more volatile than AnaptysBio. It trades about -0.33 of its total potential returns per unit of risk. AnaptysBio is currently generating about 0.39 per unit of volatility. If you would invest 1,336 in AnaptysBio on November 2, 2024 and sell it today you would earn a total of 406.00 from holding AnaptysBio or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. AnaptysBio
Performance |
| Timeline |
| Lumia |
| AnaptysBio |
Lumia and AnaptysBio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and AnaptysBio
The main advantage of trading using opposite Lumia and AnaptysBio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, AnaptysBio 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 AnaptysBio will offset losses from the drop in AnaptysBio's long position.The idea behind Lumia and AnaptysBio 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.| AnaptysBio vs. Crinetics Pharmaceuticals | AnaptysBio vs. Rhythm Pharmaceuticals | AnaptysBio vs. Kura Oncology | AnaptysBio vs. CytomX Therapeutics |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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