Correlation Between Luminar Technologies and Goodyear Tire

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

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

Diversification Opportunities for Luminar Technologies and Goodyear Tire

-0.28

Correlation Coefficient

Luminar Technologies  Goodyear Tire

Very good diversification

The 3 months correlation between Luminar and Goodyear is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Goodyear Tire go up and down completely randomly.

Pair Corralation between Luminar Technologies and Goodyear Tire

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the Goodyear Tire. In addition to that, Luminar Technologies is 2.14 times more volatile than Goodyear Tire Rubber. It trades about -0.12 of its total potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.04 per unit of volatility. If you would invest  834.00  in Goodyear Tire Rubber on October 8, 2024 and sell it today you would earn a total of  49.00  from holding Goodyear Tire Rubber or generate 5.88% return on investment over 90 days.

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

Luminar Technologies  vs.  Goodyear Tire Rubber

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.

Goodyear Tire Rubber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Goodyear Tire Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Goodyear Tire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Luminar Technologies and Goodyear Tire

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

The idea behind Luminar Technologies and Goodyear Tire Rubber 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.