Correlation Between Lumia and Wilton Resources
Can any of the company-specific risk be diversified away by investing in both Lumia and Wilton Resources 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 Wilton Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Wilton Resources, you can compare the effects of market volatilities on Lumia and Wilton Resources 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 Wilton Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Wilton Resources.
Diversification Opportunities for Lumia and Wilton Resources
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lumia and Wilton is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Wilton Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilton Resources 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 Wilton Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilton Resources has no effect on the direction of Lumia i.e., Lumia and Wilton Resources go up and down completely randomly.
Pair Corralation between Lumia and Wilton Resources
Assuming the 90 days trading horizon Lumia is expected to generate 23.44 times more return on investment than Wilton Resources. However, Lumia is 23.44 times more volatile than Wilton Resources. It trades about 0.09 of its potential returns per unit of risk. Wilton Resources is currently generating about 0.05 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 | 100.0% |
| Values | Daily Returns |
Lumia vs. Wilton Resources
Performance |
| Timeline |
| Lumia |
| Wilton Resources |
Lumia and Wilton Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Wilton Resources
The main advantage of trading using opposite Lumia and Wilton Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Wilton Resources 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 Wilton Resources will offset losses from the drop in Wilton Resources' long position.The idea behind Lumia and Wilton Resources 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.| Wilton Resources vs. Santa Fe Petroleum | Wilton Resources vs. Liberty Energy Corp | Wilton Resources vs. Rodinia Oil Corp | Wilton Resources vs. Mountainview 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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