Correlation Between Luminar Technologies and BorgWarner

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

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

Diversification Opportunities for Luminar Technologies and BorgWarner

0.18

Correlation Coefficient

Luminar Technologies  BorgWarner

Average diversification

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

Pair Corralation between Luminar Technologies and BorgWarner

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the BorgWarner. In addition to that, Luminar Technologies is 3.19 times more volatile than BorgWarner. It trades about -0.08 of its total potential returns per unit of risk. BorgWarner is currently generating about -0.01 per unit of volatility. If you would invest  3,911  in BorgWarner on September 12, 2024 and sell it today you would lose (450.00) from holding BorgWarner or give up 11.51% of portfolio value over 90 days.

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

Luminar Technologies  vs.  BorgWarner

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 uncertain 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.

BorgWarner

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BorgWarner may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Luminar Technologies and BorgWarner

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

The idea behind Luminar Technologies and BorgWarner 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.