Correlation Between Luminar Technologies and ECARX Holdings

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

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

Diversification Opportunities for Luminar Technologies and ECARX Holdings

-0.57

Correlation Coefficient

Luminar Technologies  ECARX Holdings

Excellent diversification

The 3 months correlation between Luminar and ECARX is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and ECARX Holdings Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Warrants 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 ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Warrants has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and ECARX Holdings go up and down completely randomly.

Pair Corralation between Luminar Technologies and ECARX Holdings

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the ECARX Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Luminar Technologies is 15.45 times less risky than ECARX Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The ECARX Holdings Warrants is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.00  in ECARX Holdings Warrants on October 23, 2024 and sell it today you would lose (4.05) from holding ECARX Holdings Warrants or give up 45.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	65.66%
Values	Daily Returns

Luminar Technologies  vs.  ECARX Holdings Warrants

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

ECARX Holdings Warrants

Risk-Adjusted Performance

19 of 100

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.

Pair Trading with Luminar Technologies and ECARX Holdings

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

The idea behind Luminar Technologies and ECARX Holdings Warrants 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.