Correlation Between Luna Innovations and Cepton

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

By analyzing existing cross correlation between Luna Innovations Incorporated and Cepton Inc, you can compare the effects of market volatilities on Luna Innovations and Cepton 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 Luna Innovations with a short position of Cepton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luna Innovations and Cepton.

Diversification Opportunities for Luna Innovations and Cepton

0.0

Correlation Coefficient

Luna Innovations  Cepton

Pay attention - limited upside

The 3 months correlation between Luna and Cepton is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Cepton Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cepton Inc and Luna Innovations 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 Luna Innovations Incorporated are associated (or correlated) with Cepton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cepton Inc has no effect on the direction of Luna Innovations i.e., Luna Innovations and Cepton go up and down completely randomly.

Pair Corralation between Luna Innovations and Cepton

If you would invest (100.00) in Cepton Inc on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Cepton Inc or generate -100.0% return on investment over 90 days.

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

Luna Innovations Incorporated  vs.  Cepton Inc

Luna Innovations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luna Innovations Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Luna Innovations is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cepton Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Luna Innovations and Cepton

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

The idea behind Luna Innovations Incorporated and Cepton 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.