Correlation Between Lumia and Light Science
Can any of the company-specific risk be diversified away by investing in both Lumia and Light Science 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 Light Science into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Light Science Technologies, you can compare the effects of market volatilities on Lumia and Light Science 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 Light Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Light Science.
Diversification Opportunities for Lumia and Light Science
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumia and Light is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Light Science Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Science Techno 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 Light Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Science Techno has no effect on the direction of Lumia i.e., Lumia and Light Science go up and down completely randomly.
Pair Corralation between Lumia and Light Science
Assuming the 90 days trading horizon Lumia is expected to generate 74.76 times more return on investment than Light Science. However, Lumia is 74.76 times more volatile than Light Science Technologies. It trades about 0.21 of its potential returns per unit of risk. Light Science Technologies is currently generating about -0.05 per unit of risk. If you would invest 0.00 in Lumia on October 10, 2024 and sell it today you would earn a total of 128.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. Light Science Technologies
Performance |
| Timeline |
| Lumia |
| Light Science Techno |
Lumia and Light Science Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Light Science
The main advantage of trading using opposite Lumia and Light Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Light Science 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 Light Science will offset losses from the drop in Light Science's long position.The idea behind Lumia and Light Science Technologies 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.| Light Science vs. Zegona Communications Plc | Light Science vs. Naked Wines plc | Light Science vs. Infrastrutture Wireless Italiane | Light Science vs. Orient Telecoms |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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