Correlation Between Lumia and China Resources
Can any of the company-specific risk be diversified away by investing in both Lumia and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and China Resources Power, you can compare the effects of market volatilities on Lumia and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and China Resources.
Diversification Opportunities for Lumia and China Resources
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lumia and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Lumia i.e., Lumia and China Resources go up and down completely randomly.
Pair Corralation between Lumia and China Resources
Assuming the 90 days trading horizon Lumia is expected to generate 66.0 times more return on investment than China Resources. However, Lumia is 66.0 times more volatile than China Resources Power. It trades about 0.12 of its potential returns per unit of risk. China Resources Power is currently generating about -0.11 per unit of risk. If you would invest 0.00 in Lumia on October 14, 2024 and sell it today you would earn a total of 114.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.85% |
| Values | Daily Returns |
Lumia vs. China Resources Power
Performance |
| Timeline |
| Lumia |
| China Resources Power |
Lumia and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and China Resources
The main advantage of trading using opposite Lumia and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.The idea behind Lumia and China Resources Power 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.| China Resources vs. Air Lease | China Resources vs. Lamar Advertising | China Resources vs. Luckin Coffee | China Resources vs. Lendlease Group |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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