Correlation Between Lumia and SUNation Energy
Can any of the company-specific risk be diversified away by investing in both Lumia and SUNation Energy 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 SUNation Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and SUNation Energy, you can compare the effects of market volatilities on Lumia and SUNation Energy 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 SUNation Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and SUNation Energy.
Diversification Opportunities for Lumia and SUNation Energy
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lumia and SUNation is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and SUNation Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNation Energy 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 SUNation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNation Energy has no effect on the direction of Lumia i.e., Lumia and SUNation Energy go up and down completely randomly.
Pair Corralation between Lumia and SUNation Energy
Assuming the 90 days trading horizon Lumia is expected to under-perform the SUNation Energy. In addition to that, Lumia is 1.4 times more volatile than SUNation Energy. It trades about -0.32 of its total potential returns per unit of risk. SUNation Energy is currently generating about -0.26 per unit of volatility. If you would invest 251.00 in SUNation Energy on October 25, 2024 and sell it today you would lose (48.00) from holding SUNation Energy or give up 19.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 85.71% |
| Values | Daily Returns |
Lumia vs. SUNation Energy
Performance |
| Timeline |
| Lumia |
| SUNation Energy |
Lumia and SUNation Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and SUNation Energy
The main advantage of trading using opposite Lumia and SUNation Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, SUNation Energy 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 SUNation Energy will offset losses from the drop in SUNation Energy's long position.The idea behind Lumia and SUNation Energy 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.| SUNation Energy vs. Drilling Tools International | SUNation Energy vs. National Beverage Corp | SUNation Energy vs. Energold Drilling Corp | SUNation Energy vs. Patterson UTI Energy |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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