Correlation Between Lumia and DISCOVER

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Can any of the company-specific risk be diversified away by investing in both Lumia and DISCOVER 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 DISCOVER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and DISCOVER FINL SVCS, you can compare the effects of market volatilities on Lumia and DISCOVER 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 DISCOVER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and DISCOVER.

Diversification Opportunities for Lumia and DISCOVER

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Lumia and DISCOVER is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and DISCOVER FINL SVCS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISCOVER FINL SVCS 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 DISCOVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISCOVER FINL SVCS has no effect on the direction of Lumia i.e., Lumia and DISCOVER go up and down completely randomly.

Pair Corralation between Lumia and DISCOVER

Assuming the 90 days trading horizon Lumia is expected to generate 467.25 times more return on investment than DISCOVER. However, Lumia is 467.25 times more volatile than DISCOVER FINL SVCS. It trades about 0.09 of its potential returns per unit of risk. DISCOVER FINL SVCS is currently generating about 0.0 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy88.79%
ValuesDaily Returns

Lumia  vs.  DISCOVER FINL SVCS

 Performance 
       Timeline  
Lumia 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.
DISCOVER FINL SVCS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DISCOVER FINL SVCS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DISCOVER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lumia and DISCOVER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lumia and DISCOVER

The main advantage of trading using opposite Lumia and DISCOVER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, DISCOVER 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 DISCOVER will offset losses from the drop in DISCOVER's long position.
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The idea behind Lumia and DISCOVER FINL SVCS 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.
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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