Correlation Between Inventiva and Lumos Pharma

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

By analyzing existing cross correlation between Inventiva Sa and Lumos Pharma, you can compare the effects of market volatilities on Inventiva and Lumos Pharma 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 Inventiva with a short position of Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inventiva and Lumos Pharma.

Diversification Opportunities for Inventiva and Lumos Pharma

0.74

Correlation Coefficient

Inventiva  Lumos Pharma

Poor diversification

The 3 months correlation between Inventiva and Lumos is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Inventiva Sa and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and Inventiva 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 Inventiva Sa are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Inventiva i.e., Inventiva and Lumos Pharma go up and down completely randomly.

Pair Corralation between Inventiva and Lumos Pharma

Considering the 90-day investment horizon Inventiva Sa is expected to under-perform the Lumos Pharma. In addition to that, Inventiva is 2.31 times more volatile than Lumos Pharma. It trades about -0.38 of its total potential returns per unit of risk. Lumos Pharma is currently generating about 0.02 per unit of volatility. If you would invest  433.00  in Lumos Pharma on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Lumos Pharma or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Inventiva Sa  vs.  Lumos Pharma

Inventiva Sa

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inventiva Sa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Inventiva sustained solid returns over the last few months and may actually be approaching a breakup point.

Lumos Pharma

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lumos Pharma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inventiva and Lumos Pharma

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

The idea behind Inventiva Sa and Lumos Pharma 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.