Correlation Between Lumia and Advantage Portfolio
Can any of the company-specific risk be diversified away by investing in both Lumia and Advantage Portfolio 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 Advantage Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Advantage Portfolio Class, you can compare the effects of market volatilities on Lumia and Advantage Portfolio 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 Advantage Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Advantage Portfolio.
Diversification Opportunities for Lumia and Advantage Portfolio
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumia and Advantage is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class 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 Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Lumia i.e., Lumia and Advantage Portfolio go up and down completely randomly.
Pair Corralation between Lumia and Advantage Portfolio
Assuming the 90 days trading horizon Lumia is expected to generate 50.12 times more return on investment than Advantage Portfolio. However, Lumia is 50.12 times more volatile than Advantage Portfolio Class. It trades about 0.07 of its potential returns per unit of risk. Advantage Portfolio Class is currently generating about 0.12 per unit of risk. If you would invest 0.00 in Lumia on October 12, 2024 and sell it today you would earn a total of 117.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.89% |
| Values | Daily Returns |
Lumia vs. Advantage Portfolio Class
Performance |
| Timeline |
| Lumia |
| Advantage Portfolio Class |
Lumia and Advantage Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Advantage Portfolio
The main advantage of trading using opposite Lumia and Advantage Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Advantage Portfolio 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 Advantage Portfolio will offset losses from the drop in Advantage Portfolio's long position.The idea behind Lumia and Advantage Portfolio Class 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.| Advantage Portfolio vs. Lgm Risk Managed | Advantage Portfolio vs. Lord Abbett Short | Advantage Portfolio vs. Barings High Yield | Advantage Portfolio vs. Dunham High Yield |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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