Correlation Between Luminar Technologies and Adient PLC

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

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

Diversification Opportunities for Luminar Technologies and Adient PLC

0.54

Correlation Coefficient

Luminar Technologies  Adient PLC

Very weak diversification

The 3 months correlation between Luminar and Adient is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Luminar Technologies 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 Luminar Technologies are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Adient PLC go up and down completely randomly.

Pair Corralation between Luminar Technologies and Adient PLC

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the Adient PLC. In addition to that, Luminar Technologies is 3.03 times more volatile than Adient PLC. It trades about -0.1 of its total potential returns per unit of risk. Adient PLC is currently generating about -0.09 per unit of volatility. If you would invest  2,560  in Adient PLC on September 14, 2024 and sell it today you would lose (664.00) from holding Adient PLC or give up 25.94% of portfolio value over 90 days.

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

Luminar Technologies  vs.  Adient PLC

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.

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Luminar Technologies and Adient PLC

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

The idea behind Luminar Technologies and Adient PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.