Correlation Between Lumia and NMC Health
Can any of the company-specific risk be diversified away by investing in both Lumia and NMC Health 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 NMC Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and NMC Health PLC, you can compare the effects of market volatilities on Lumia and NMC Health 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 NMC Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and NMC Health.
Diversification Opportunities for Lumia and NMC Health
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lumia and NMC is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and NMC Health PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMC Health PLC 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 NMC Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMC Health PLC has no effect on the direction of Lumia i.e., Lumia and NMC Health go up and down completely randomly.
Pair Corralation between Lumia and NMC Health
Assuming the 90 days trading horizon Lumia is expected to generate 2.37 times more return on investment than NMC Health. However, Lumia is 2.37 times more volatile than NMC Health PLC. It trades about 0.05 of its potential returns per unit of risk. NMC Health PLC is currently generating about -0.21 per unit of risk. If you would invest 0.00 in Lumia on October 16, 2024 and sell it today you would earn a total of 108.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.95% |
| Values | Daily Returns |
Lumia vs. NMC Health PLC
Performance |
| Timeline |
| Lumia |
| NMC Health PLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lumia and NMC Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and NMC Health
The main advantage of trading using opposite Lumia and NMC Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, NMC Health 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 NMC Health will offset losses from the drop in NMC Health's long position.The idea behind Lumia and NMC Health PLC 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.| NMC Health vs. Veltex | NMC Health vs. Numinus Wellness | NMC Health vs. IMAC Holdings | NMC Health vs. P3 Health Partners |
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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