Correlation Between Lumax International and WPG Holdings

Can any of the company-specific risk be diversified away by investing in both Lumax International and WPG Holdings 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 Lumax International and WPG Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lumax International Corp and WPG Holdings, you can compare the effects of market volatilities on Lumax International and WPG Holdings 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 Lumax International with a short position of WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumax International and WPG Holdings.

Diversification Opportunities for Lumax International and WPG Holdings

0.51

Correlation Coefficient

Lumax International  WPG Holdings

Very weak diversification

The 3 months correlation between Lumax and WPG is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lumax International Corp and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings and Lumax International 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 Lumax International Corp are associated (or correlated) with WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Lumax International i.e., Lumax International and WPG Holdings go up and down completely randomly.

Pair Corralation between Lumax International and WPG Holdings

Assuming the 90 days trading horizon Lumax International Corp is expected to generate 0.97 times more return on investment than WPG Holdings. However, Lumax International Corp is 1.03 times less risky than WPG Holdings. It trades about -0.1 of its potential returns per unit of risk. WPG Holdings is currently generating about -0.14 per unit of risk. If you would invest  12,000  in Lumax International Corp on September 23, 2024 and sell it today you would lose (1,150) from holding Lumax International Corp or give up 9.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lumax International Corp  vs.  WPG Holdings

Lumax International Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumax International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

WPG Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPG Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lumax International and WPG Holdings

The main advantage of trading using opposite Lumax International and WPG Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumax International position performs unexpectedly, WPG Holdings 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 WPG Holdings will offset losses from the drop in WPG Holdings' long position.

The idea behind Lumax International Corp and WPG Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.