Correlation Between Workhorse and Luminar Technologies

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

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

Diversification Opportunities for Workhorse and Luminar Technologies

0.92

Correlation Coefficient

Workhorse  Luminar Technologies

Almost no diversification

The 3 months correlation between Workhorse and Luminar is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Workhorse Group and Luminar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luminar Technologies and Workhorse 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 Workhorse Group are associated (or correlated) with Luminar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luminar Technologies has no effect on the direction of Workhorse i.e., Workhorse and Luminar Technologies go up and down completely randomly.

Pair Corralation between Workhorse and Luminar Technologies

Given the investment horizon of 90 days Workhorse Group is expected to generate 1.07 times more return on investment than Luminar Technologies. However, Workhorse is 1.07 times more volatile than Luminar Technologies. It trades about -0.1 of its potential returns per unit of risk. Luminar Technologies is currently generating about -0.12 per unit of risk. If you would invest  165.00  in Workhorse Group on July 13, 2024 and sell it today you would lose (87.00) from holding Workhorse Group or give up 52.73% of portfolio value over 90 days.

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

Workhorse Group  vs.  Luminar Technologies

Workhorse Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workhorse Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Luminar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luminar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Workhorse and Luminar Technologies

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

The idea behind Workhorse Group and Luminar Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.