Correlation Between Lightning EMotors and Xos

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

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

Diversification Opportunities for Lightning EMotors and Xos

0.26

Correlation Coefficient

Lightning EMotors  Xos

Modest diversification

The 3 months correlation between Lightning and Xos is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lightning EMotors and Xos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Inc and Lightning EMotors 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 Lightning EMotors are associated (or correlated) with Xos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Inc has no effect on the direction of Lightning EMotors i.e., Lightning EMotors and Xos go up and down completely randomly.

Pair Corralation between Lightning EMotors and Xos

Considering the 90-day investment horizon Lightning EMotors is expected to generate 1.38 times more return on investment than Xos. However, Lightning EMotors is 1.38 times more volatile than Xos Inc. It trades about -0.01 of its potential returns per unit of risk. Xos Inc is currently generating about -0.02 per unit of risk. If you would invest  733.00  in Lightning EMotors on September 20, 2024 and sell it today you would lose (347.00) from holding Lightning EMotors or give up 47.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.43%
Values	Daily Returns

Lightning EMotors  vs.  Xos Inc

Lightning EMotors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lightning EMotors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lightning EMotors is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xos Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lightning EMotors and Xos

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

The idea behind Lightning EMotors and Xos Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.