Correlation Between Lucid and WELLS

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

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

Diversification Opportunities for Lucid and WELLS

0.32

Correlation Coefficient

Lucid  WELLS

Weak diversification

The 3 months correlation between Lucid and WELLS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and WELLS FARGO BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO BK 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 WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO BK has no effect on the direction of Lucid i.e., Lucid and WELLS go up and down completely randomly.

Pair Corralation between Lucid and WELLS

Given the investment horizon of 90 days Lucid Group is expected to under-perform the WELLS. In addition to that, Lucid is 4.33 times more volatile than WELLS FARGO BK. It trades about -0.08 of its total potential returns per unit of risk. WELLS FARGO BK is currently generating about -0.1 per unit of volatility. If you would invest  10,317  in WELLS FARGO BK on December 30, 2024 and sell it today you would lose (324.00) from holding WELLS FARGO BK or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	45.16%
Values	Daily Returns

Lucid Group  vs.  WELLS FARGO BK

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 abnormal performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

WELLS FARGO BK

Risk-Adjusted Performance

Very Weak

Over the last 90 days WELLS FARGO BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WELLS FARGO BK investors.

Pair Trading with Lucid and WELLS

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

The idea behind Lucid Group and WELLS FARGO BK 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.