Correlation Between Lear and Innoviz Technologies

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

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

Diversification Opportunities for Lear and Innoviz Technologies

0.45

Correlation Coefficient

Lear  Innoviz Technologies

Very weak diversification

The 3 months correlation between Lear and Innoviz is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Innoviz Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innoviz Technologies and Lear 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 Lear Corporation are associated (or correlated) with Innoviz Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innoviz Technologies has no effect on the direction of Lear i.e., Lear and Innoviz Technologies go up and down completely randomly.

Pair Corralation between Lear and Innoviz Technologies

Considering the 90-day investment horizon Lear Corporation is expected to generate 0.32 times more return on investment than Innoviz Technologies. However, Lear Corporation is 3.08 times less risky than Innoviz Technologies. It trades about -0.02 of its potential returns per unit of risk. Innoviz Technologies is currently generating about -0.05 per unit of risk. If you would invest  12,272  in Lear Corporation on September 5, 2024 and sell it today you would lose (2,356) from holding Lear Corporation or give up 19.2% of portfolio value over 90 days.

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

Lear Corp.  vs.  Innoviz Technologies

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Innoviz Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innoviz Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Innoviz Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lear and Innoviz Technologies

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

The idea behind Lear Corporation and Innoviz Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.