Correlation Between Lumia and Mission Valley
Can any of the company-specific risk be diversified away by investing in both Lumia and Mission Valley 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 Mission Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Mission Valley Bancorp, you can compare the effects of market volatilities on Lumia and Mission Valley 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 Mission Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Mission Valley.
Diversification Opportunities for Lumia and Mission Valley
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumia and Mission is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Mission Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mission Valley Bancorp 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 Mission Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mission Valley Bancorp has no effect on the direction of Lumia i.e., Lumia and Mission Valley go up and down completely randomly.
Pair Corralation between Lumia and Mission Valley
Assuming the 90 days trading horizon Lumia is expected to generate 36.8 times more return on investment than Mission Valley. However, Lumia is 36.8 times more volatile than Mission Valley Bancorp. It trades about 0.04 of its potential returns per unit of risk. Mission Valley Bancorp is currently generating about 0.04 per unit of risk. If you would invest 0.00 in Lumia on November 2, 2024 and sell it today you would earn a total of 91.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.1% |
| Values | Daily Returns |
Lumia vs. Mission Valley Bancorp
Performance |
| Timeline |
| Lumia |
| Mission Valley Bancorp |
Lumia and Mission Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Mission Valley
The main advantage of trading using opposite Lumia and Mission Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Mission Valley 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 Mission Valley will offset losses from the drop in Mission Valley's long position.The idea behind Lumia and Mission Valley Bancorp 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.| Mission Valley vs. Pacific Valley Bank | Mission Valley vs. American Business Bk | Mission Valley vs. Pinnacle Bank | Mission Valley vs. Pacific Financial Corp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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