Correlation Between Lucid and Valmont Industries

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

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

Diversification Opportunities for Lucid and Valmont Industries

-0.85

Correlation Coefficient

Lucid  Valmont Industries

Pay attention - limited upside

The 3 months correlation between Lucid and Valmont is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Lucid i.e., Lucid and Valmont Industries go up and down completely randomly.

Pair Corralation between Lucid and Valmont Industries

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Valmont Industries. In addition to that, Lucid is 2.28 times more volatile than Valmont Industries. It trades about -0.03 of its total potential returns per unit of risk. Valmont Industries is currently generating about 0.01 per unit of volatility. If you would invest  31,786  in Valmont Industries on October 6, 2024 and sell it today you would lose (805.00) from holding Valmont Industries or give up 2.53% of portfolio value over 90 days.

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

Lucid Group  vs.  Valmont Industries

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 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.

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Valmont Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lucid and Valmont Industries

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

The idea behind Lucid Group and Valmont Industries 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.