Correlation Between Lumia and Fox Wizel
Can any of the company-specific risk be diversified away by investing in both Lumia and Fox Wizel 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 Fox Wizel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Fox Wizel, you can compare the effects of market volatilities on Lumia and Fox Wizel 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 Fox Wizel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Fox Wizel.
Diversification Opportunities for Lumia and Fox Wizel
Poor diversification
The 3 months correlation between Lumia and Fox is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Fox Wizel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Wizel 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 Fox Wizel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Wizel has no effect on the direction of Lumia i.e., Lumia and Fox Wizel go up and down completely randomly.
Pair Corralation between Lumia and Fox Wizel
Assuming the 90 days trading horizon Lumia is expected to under-perform the Fox Wizel. In addition to that, Lumia is 3.5 times more volatile than Fox Wizel. It trades about -0.07 of its total potential returns per unit of risk. Fox Wizel is currently generating about 0.05 per unit of volatility. If you would invest 3,049,000 in Fox Wizel on October 21, 2024 and sell it today you would earn a total of 42,000 from holding Fox Wizel or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.19% |
| Values | Daily Returns |
Lumia vs. Fox Wizel
Performance |
| Timeline |
| Lumia |
| Fox Wizel |
Lumia and Fox Wizel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Fox Wizel
The main advantage of trading using opposite Lumia and Fox Wizel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Fox Wizel 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 Fox Wizel will offset losses from the drop in Fox Wizel's long position.The idea behind Lumia and Fox Wizel 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.| Fox Wizel vs. Azrieli Group | Fox Wizel vs. Shufersal | Fox Wizel vs. Rami Levi | Fox Wizel vs. Fattal 1998 Holdings |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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