Correlation Between Luminar Technologies and Holley

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

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

Diversification Opportunities for Luminar Technologies and Holley

0.15

Correlation Coefficient

Luminar Technologies  Holley

Average diversification

The 3 months correlation between Luminar and Holley is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc 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 Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Holley go up and down completely randomly.

Pair Corralation between Luminar Technologies and Holley

Given the investment horizon of 90 days Luminar Technologies is expected to generate 2.25 times more return on investment than Holley. However, Luminar Technologies is 2.25 times more volatile than Holley Inc. It trades about 0.07 of its potential returns per unit of risk. Holley Inc is currently generating about -0.02 per unit of risk. If you would invest  546.00  in Luminar Technologies on December 28, 2024 and sell it today you would earn a total of  69.00  from holding Luminar Technologies or generate 12.64% 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.  Holley Inc

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.

Holley Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holley Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Holley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Luminar Technologies and Holley

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

The idea behind Luminar Technologies and Holley Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.