Correlation Between Lumia and Aeroports

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Can any of the company-specific risk be diversified away by investing in both Lumia and Aeroports 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 Aeroports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Aeroports de Paris, you can compare the effects of market volatilities on Lumia and Aeroports 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 Aeroports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Aeroports.

Diversification Opportunities for Lumia and Aeroports

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Lumia and Aeroports is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris 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 Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Lumia i.e., Lumia and Aeroports go up and down completely randomly.

Pair Corralation between Lumia and Aeroports

Assuming the 90 days trading horizon Lumia is expected to under-perform the Aeroports. In addition to that, Lumia is 3.94 times more volatile than Aeroports de Paris. It trades about -0.14 of its total potential returns per unit of risk. Aeroports de Paris is currently generating about -0.38 per unit of volatility. If you would invest  1,207  in Aeroports de Paris on October 20, 2024 and sell it today you would lose (168.00) from holding Aeroports de Paris or give up 13.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Lumia  vs.  Aeroports de Paris

 Performance 
       Timeline  
Lumia 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.
Aeroports de Paris 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aeroports de Paris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lumia and Aeroports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lumia and Aeroports

The main advantage of trading using opposite Lumia and Aeroports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Aeroports 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 Aeroports will offset losses from the drop in Aeroports' long position.
The idea behind Lumia and Aeroports de Paris 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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