Correlation Between ECARX Holdings and Luminar Technologies

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Can any of the company-specific risk be diversified away by investing in both ECARX Holdings 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 ECARX Holdings and Luminar Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECARX Holdings Warrants and Luminar Technologies, you can compare the effects of market volatilities on ECARX Holdings 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 ECARX Holdings with a short position of Luminar Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECARX Holdings and Luminar Technologies.

Diversification Opportunities for ECARX Holdings and Luminar Technologies

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between ECARX and Luminar is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding ECARX Holdings Warrants and Luminar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luminar Technologies and ECARX Holdings 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 ECARX Holdings Warrants 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 ECARX Holdings i.e., ECARX Holdings and Luminar Technologies go up and down completely randomly.

Pair Corralation between ECARX Holdings and Luminar Technologies

Assuming the 90 days horizon ECARX Holdings Warrants is expected to generate 2.33 times more return on investment than Luminar Technologies. However, ECARX Holdings is 2.33 times more volatile than Luminar Technologies. It trades about 0.25 of its potential returns per unit of risk. Luminar Technologies is currently generating about -0.08 per unit of risk. If you would invest  1.55  in ECARX Holdings Warrants on October 23, 2024 and sell it today you would earn a total of  3.40  from holding ECARX Holdings Warrants or generate 219.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy60.66%
ValuesDaily Returns

ECARX Holdings Warrants  vs.  Luminar Technologies

 Performance 
       Timeline  
ECARX Holdings Warrants 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Warrants are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.
Luminar Technologies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ECARX Holdings and Luminar Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ECARX Holdings and Luminar Technologies

The main advantage of trading using opposite ECARX Holdings and Luminar Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECARX Holdings 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 ECARX Holdings Warrants 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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