Correlation Between Lucid and PACCAR

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

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

Diversification Opportunities for Lucid and PACCAR

-0.38

Correlation Coefficient

Lucid  PACCAR

Very good diversification

The 3 months correlation between Lucid and PACCAR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Lucid i.e., Lucid and PACCAR go up and down completely randomly.

Pair Corralation between Lucid and PACCAR

Given the investment horizon of 90 days Lucid Group is expected to under-perform the PACCAR. In addition to that, Lucid is 3.29 times more volatile than PACCAR Inc. It trades about -0.21 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.13 per unit of volatility. If you would invest  10,578  in PACCAR Inc on December 10, 2024 and sell it today you would earn a total of  478.00  from holding PACCAR Inc or generate 4.52% return on investment over 90 days.

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

Lucid Group  vs.  PACCAR Inc

Lucid Group

Risk-Adjusted Performance

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 rather sound forward indicators, Lucid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lucid and PACCAR

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

The idea behind Lucid Group and PACCAR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.