Correlation Between Lumia and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Lumia and Mid Cap 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 Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Mid Cap Index, you can compare the effects of market volatilities on Lumia and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Mid Cap.
Diversification Opportunities for Lumia and Mid Cap
Good diversification
The 3 months correlation between Lumia and Mid is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Index 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Index has no effect on the direction of Lumia i.e., Lumia and Mid Cap go up and down completely randomly.
Pair Corralation between Lumia and Mid Cap
Assuming the 90 days trading horizon Lumia is expected to under-perform the Mid Cap. In addition to that, Lumia is 7.26 times more volatile than Mid Cap Index. It trades about -0.33 of its total potential returns per unit of risk. Mid Cap Index is currently generating about 0.31 per unit of volatility. If you would invest 2,782 in Mid Cap Index on November 2, 2024 and sell it today you would earn a total of 138.00 from holding Mid Cap Index or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. Mid Cap Index
Performance |
| Timeline |
| Lumia |
| Mid Cap Index |
Lumia and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Mid Cap
The main advantage of trading using opposite Lumia and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.The idea behind Lumia and Mid Cap Index 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.| Mid Cap vs. Doubleline Total Return | Mid Cap vs. Ab Global Bond | Mid Cap vs. Gmo High Yield | Mid Cap vs. Ambrus Core Bond |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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