Correlation Between Luminar Technologies and Allison Transmission

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

By analyzing existing cross correlation between Luminar Technologies and Allison Transmission Holdings, you can compare the effects of market volatilities on Luminar Technologies and Allison Transmission 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 Allison Transmission. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luminar Technologies and Allison Transmission.

Diversification Opportunities for Luminar Technologies and Allison Transmission

0.18

Correlation Coefficient

Luminar Technologies  Allison Transmission

Average diversification

The 3 months correlation between Luminar and Allison is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Allison Transmission Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allison Transmission 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 Allison Transmission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allison Transmission has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Allison Transmission go up and down completely randomly.

Pair Corralation between Luminar Technologies and Allison Transmission

Given the investment horizon of 90 days Luminar Technologies is expected to generate 4.49 times more return on investment than Allison Transmission. However, Luminar Technologies is 4.49 times more volatile than Allison Transmission Holdings. It trades about 0.06 of its potential returns per unit of risk. Allison Transmission Holdings is currently generating about -0.07 per unit of risk. If you would invest  546.00  in Luminar Technologies on December 29, 2024 and sell it today you would earn a total of  56.00  from holding Luminar Technologies or generate 10.26% return on investment over 90 days.

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

Luminar Technologies  vs.  Allison Transmission Holdings

Luminar Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luminar Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Luminar Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Allison Transmission

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allison Transmission Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Luminar Technologies and Allison Transmission

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

The idea behind Luminar Technologies and Allison Transmission Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.