Correlation Between Lilium NV and Joby Aviation

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

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

Diversification Opportunities for Lilium NV and Joby Aviation

0.86

Correlation Coefficient

Lilium NV  Joby Aviation

Very poor diversification

The 3 months correlation between Lilium and Joby is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and Joby Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joby Aviation and Lilium NV 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 Lilium NV are associated (or correlated) with Joby Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joby Aviation has no effect on the direction of Lilium NV i.e., Lilium NV and Joby Aviation go up and down completely randomly.

Pair Corralation between Lilium NV and Joby Aviation

Given the investment horizon of 90 days Lilium NV is expected to generate 1.05 times less return on investment than Joby Aviation. But when comparing it to its historical volatility, Lilium NV is 1.42 times less risky than Joby Aviation. It trades about 0.15 of its potential returns per unit of risk. Joby Aviation is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  499.00  in Joby Aviation on July 11, 2024 and sell it today you would earn a total of  67.00  from holding Joby Aviation or generate 13.43% return on investment over 90 days.

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

Lilium NV  vs.  Joby Aviation

Lilium NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lilium NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Joby Aviation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joby Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Joby Aviation is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lilium NV and Joby Aviation

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

The idea behind Lilium NV and Joby Aviation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.