Correlation Between Lucid and Almacenes Xito

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

By analyzing existing cross correlation between Lucid Group and Almacenes xito SA, you can compare the effects of market volatilities on Lucid and Almacenes Xito 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 Almacenes Xito. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Almacenes Xito.

Diversification Opportunities for Lucid and Almacenes Xito

-0.46

Correlation Coefficient

Lucid  Almacenes Xito

Very good diversification

The 3 months correlation between Lucid and Almacenes is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito SA 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 Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Lucid i.e., Lucid and Almacenes Xito go up and down completely randomly.

Pair Corralation between Lucid and Almacenes Xito

Given the investment horizon of 90 days Lucid Group is expected to generate 1.63 times more return on investment than Almacenes Xito. However, Lucid is 1.63 times more volatile than Almacenes xito SA. It trades about 0.04 of its potential returns per unit of risk. Almacenes xito SA is currently generating about -0.03 per unit of risk. If you would invest  213.00  in Lucid Group on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Lucid Group or generate 4.23% return on investment over 90 days.

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

Lucid Group  vs.  Almacenes xito SA

Lucid Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lucid Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Lucid exhibited solid returns over the last few months and may actually be approaching a breakup point.

Almacenes xito SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Almacenes Xito is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lucid and Almacenes Xito

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

The idea behind Lucid Group and Almacenes xito SA 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.