Correlation Between Lumia and Fresnillo Plc
Can any of the company-specific risk be diversified away by investing in both Lumia and Fresnillo Plc 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 Fresnillo Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Fresnillo plc, you can compare the effects of market volatilities on Lumia and Fresnillo Plc 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 Fresnillo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Fresnillo Plc.
Diversification Opportunities for Lumia and Fresnillo Plc
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lumia and Fresnillo is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Fresnillo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo 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 Fresnillo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo plc has no effect on the direction of Lumia i.e., Lumia and Fresnillo Plc go up and down completely randomly.
Pair Corralation between Lumia and Fresnillo Plc
Assuming the 90 days trading horizon Lumia is expected to under-perform the Fresnillo Plc. In addition to that, Lumia is 3.02 times more volatile than Fresnillo plc. It trades about -0.33 of its total potential returns per unit of risk. Fresnillo plc is currently generating about -0.22 per unit of volatility. If you would invest 870.00 in Fresnillo plc on October 13, 2024 and sell it today you would lose (73.00) from holding Fresnillo plc or give up 8.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Lumia vs. Fresnillo plc
Performance |
| Timeline |
| Lumia |
| Fresnillo plc |
Lumia and Fresnillo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Fresnillo Plc
The main advantage of trading using opposite Lumia and Fresnillo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Fresnillo Plc 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 Fresnillo Plc will offset losses from the drop in Fresnillo Plc's long position.The idea behind Lumia and Fresnillo 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.| Fresnillo Plc vs. 24SEVENOFFICE GROUP AB | Fresnillo Plc vs. IMPERIAL TOBACCO | Fresnillo Plc vs. AIR PRODCHEMICALS | Fresnillo Plc vs. Corporate Office Properties |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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