Correlation Between Lucid and Dongfeng

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

By analyzing existing cross correlation between Lucid Group and Dongfeng Group, you can compare the effects of market volatilities on Lucid and Dongfeng 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 Lucid with a short position of Dongfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Dongfeng.

Diversification Opportunities for Lucid and Dongfeng

-0.51

Correlation Coefficient

Lucid  Dongfeng

Excellent diversification

The 3 months correlation between Lucid and Dongfeng is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng Group and Lucid 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 Lucid Group are associated (or correlated) with Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of Lucid i.e., Lucid and Dongfeng go up and down completely randomly.

Pair Corralation between Lucid and Dongfeng

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Dongfeng. In addition to that, Lucid is 1.05 times more volatile than Dongfeng Group. It trades about -0.01 of its total potential returns per unit of risk. Dongfeng Group is currently generating about 0.02 per unit of volatility. If you would invest  59.00  in Dongfeng Group on September 19, 2024 and sell it today you would lose (6.00) from holding Dongfeng Group or give up 10.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Lucid Group  vs.  Dongfeng Group

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Dongfeng Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Dongfeng reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucid and Dongfeng

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

The idea behind Lucid Group and Dongfeng Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.