Correlation Between Lumia and TrueShares Structured
Can any of the company-specific risk be diversified away by investing in both Lumia and TrueShares Structured 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 TrueShares Structured into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and TrueShares Structured Outcome, you can compare the effects of market volatilities on Lumia and TrueShares Structured 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 TrueShares Structured. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and TrueShares Structured.
Diversification Opportunities for Lumia and TrueShares Structured
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lumia and TrueShares is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and TrueShares Structured Outcome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueShares Structured 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 TrueShares Structured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueShares Structured has no effect on the direction of Lumia i.e., Lumia and TrueShares Structured go up and down completely randomly.
Pair Corralation between Lumia and TrueShares Structured
Assuming the 90 days trading horizon Lumia is expected to under-perform the TrueShares Structured. In addition to that, Lumia is 9.58 times more volatile than TrueShares Structured Outcome. It trades about -0.07 of its total potential returns per unit of risk. TrueShares Structured Outcome is currently generating about 0.06 per unit of volatility. If you would invest 3,163 in TrueShares Structured Outcome on October 21, 2024 and sell it today you would earn a total of 26.00 from holding TrueShares Structured Outcome or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. TrueShares Structured Outcome
Performance |
| Timeline |
| Lumia |
| TrueShares Structured |
Lumia and TrueShares Structured Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and TrueShares Structured
The main advantage of trading using opposite Lumia and TrueShares Structured positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, TrueShares Structured 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 TrueShares Structured will offset losses from the drop in TrueShares Structured's long position.The idea behind Lumia and TrueShares Structured Outcome 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.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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