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

0.35

Correlation Coefficient

Luminar Technologies  NSK

Weak diversification

The 3 months correlation between Luminar and NSK is 0.35. 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 under-perform the NSK. In addition to that, Luminar Technologies is 2.5 times more volatile than NSK Ltd ADR. It trades about -0.06 of its total potential returns per unit of risk. NSK Ltd ADR is currently generating about -0.01 per unit of volatility. If you would invest  889.00  in NSK Ltd ADR on December 1, 2024 and sell it today you would lose (42.00) from holding NSK Ltd ADR or give up 4.72% of portfolio value 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

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

NSK Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NSK Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, NSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.