Correlation Between Luminar Technologies and Fox Factory

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

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

Diversification Opportunities for Luminar Technologies and Fox Factory

0.13

Correlation Coefficient

Luminar Technologies  Fox Factory

Average diversification

The 3 months correlation between Luminar and Fox is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Fox Factory Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Factory Holding 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 Fox Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Factory Holding has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Fox Factory go up and down completely randomly.

Pair Corralation between Luminar Technologies and Fox Factory

Given the investment horizon of 90 days Luminar Technologies is expected to generate 4.18 times more return on investment than Fox Factory. However, Luminar Technologies is 4.18 times more volatile than Fox Factory Holding. It trades about 0.04 of its potential returns per unit of risk. Fox Factory Holding is currently generating about -0.09 per unit of risk. If you would invest  584.00  in Luminar Technologies on December 27, 2024 and sell it today you would lose (18.00) from holding Luminar Technologies or give up 3.08% 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.  Fox Factory Holding

Luminar Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luminar Technologies are ranked lower than 3 (%) 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.

Fox Factory Holding

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Luminar Technologies and Fox Factory

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

The idea behind Luminar Technologies and Fox Factory Holding 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.