Correlation Between Luminar Technologies and NSK

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

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

Diversification Opportunities for Luminar Technologies and NSK

0.29

Correlation Coefficient

Luminar Technologies  NSK

Modest diversification

The 3 months correlation between Luminar and NSK is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and NSK Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSK Ltd ADR 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 NSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSK Ltd ADR has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and NSK go up and down completely randomly.

Pair Corralation between Luminar Technologies and NSK

Given the investment horizon of 90 days Luminar Technologies is expected to generate 3.04 times more return on investment than NSK. However, Luminar Technologies is 3.04 times more volatile than NSK Ltd ADR. It trades about 0.07 of its potential returns per unit of risk. NSK Ltd ADR is currently generating about 0.1 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Luminar Technologies  vs.  NSK Ltd ADR

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.

NSK Ltd ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NSK Ltd ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, NSK showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luminar Technologies and NSK

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

The idea behind Luminar Technologies and NSK Ltd ADR 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.

Check out your portfolio center.

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.