Correlation Between Lumia and Umbra Applied
Can any of the company-specific risk be diversified away by investing in both Lumia and Umbra Applied 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 Umbra Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Umbra Applied Technologies, you can compare the effects of market volatilities on Lumia and Umbra Applied 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 Umbra Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Umbra Applied.
Diversification Opportunities for Lumia and Umbra Applied
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lumia and Umbra is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Umbra Applied Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umbra Applied Techno 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 Umbra Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umbra Applied Techno has no effect on the direction of Lumia i.e., Lumia and Umbra Applied go up and down completely randomly.
Pair Corralation between Lumia and Umbra Applied
Assuming the 90 days trading horizon Lumia is expected to generate 18.17 times more return on investment than Umbra Applied. However, Lumia is 18.17 times more volatile than Umbra Applied Technologies. It trades about 0.12 of its potential returns per unit of risk. Umbra Applied Technologies is currently generating about 0.07 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 | Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
Lumia vs. Umbra Applied Technologies
Performance |
| Timeline |
| Lumia |
| Umbra Applied Techno |
Lumia and Umbra Applied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Umbra Applied
The main advantage of trading using opposite Lumia and Umbra Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Umbra Applied 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 Umbra Applied will offset losses from the drop in Umbra Applied's long position.The idea behind Lumia and Umbra Applied Technologies 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.| Umbra Applied vs. World Oil Group | Umbra Applied vs. NN Inc | Umbra Applied vs. 3M Company | Umbra Applied vs. Global Tech Industries |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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