Correlation Between Fox Factory and Luminar Technologies

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

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

Diversification Opportunities for Fox Factory and Luminar Technologies

0.32

Correlation Coefficient

Fox Factory  Luminar Technologies

Weak diversification

The 3 months correlation between Fox and Luminar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fox Factory Holding and Luminar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luminar Technologies and Fox Factory 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 Fox Factory Holding 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 Fox Factory i.e., Fox Factory and Luminar Technologies go up and down completely randomly.

Pair Corralation between Fox Factory and Luminar Technologies

Given the investment horizon of 90 days Fox Factory Holding is expected to generate 0.48 times more return on investment than Luminar Technologies. However, Fox Factory Holding is 2.11 times less risky than Luminar Technologies. It trades about -0.07 of its potential returns per unit of risk. Luminar Technologies is currently generating about -0.07 per unit of risk. If you would invest  4,459  in Fox Factory Holding on September 5, 2024 and sell it today you would lose (1,309) from holding Fox Factory Holding or give up 29.36% of portfolio value over 90 days.

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

Fox Factory Holding  vs.  Luminar Technologies

Fox Factory Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fox Factory Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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

Pair Trading with Fox Factory and Luminar Technologies

The main advantage of trading using opposite Fox Factory and Luminar Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fox Factory 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 Fox Factory Holding 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.