Correlation Between Topicus and Lumine

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

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

Diversification Opportunities for Topicus and Lumine

-0.65

Correlation Coefficient

Topicus  Lumine

Excellent diversification

The 3 months correlation between Topicus and Lumine is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Topicus and Lumine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumine Group and Topicus 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 Topicus are associated (or correlated) with Lumine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumine Group has no effect on the direction of Topicus i.e., Topicus and Lumine go up and down completely randomly.

Pair Corralation between Topicus and Lumine

Assuming the 90 days horizon Topicus is expected to under-perform the Lumine. But the stock apears to be less risky and, when comparing its historical volatility, Topicus is 1.7 times less risky than Lumine. The stock trades about -0.16 of its potential returns per unit of risk. The Lumine Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,470  in Lumine Group on September 15, 2024 and sell it today you would earn a total of  949.00  from holding Lumine Group or generate 27.35% return on investment over 90 days.

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

Topicus  vs.  Lumine Group

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Lumine Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumine Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lumine showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topicus and Lumine

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

The idea behind Topicus and Lumine Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.