Correlation Between Illumina and Lonza Group

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

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

Diversification Opportunities for Illumina and Lonza Group

-0.56

Correlation Coefficient

Illumina  Lonza Group

Excellent diversification

The 3 months correlation between Illumina and Lonza is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG and Illumina 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 Illumina are associated (or correlated) with Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of Illumina i.e., Illumina and Lonza Group go up and down completely randomly.

Pair Corralation between Illumina and Lonza Group

Given the investment horizon of 90 days Illumina is expected to under-perform the Lonza Group. In addition to that, Illumina is 1.41 times more volatile than Lonza Group AG. It trades about -0.16 of its total potential returns per unit of risk. Lonza Group AG is currently generating about -0.07 per unit of volatility. If you would invest  5,886  in Lonza Group AG on January 26, 2024 and sell it today you would lose (159.00) from holding Lonza Group AG or give up 2.7% of portfolio value over 90 days.

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

Illumina  vs.  Lonza Group AG

Illumina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Illumina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lonza Group AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Lonza Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Illumina and Lonza Group

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

The idea behind Illumina and Lonza Group AG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .