Correlation Between Luna Innovations and Garmin

Can any of the company-specific risk be diversified away by investing in both Luna Innovations and Garmin 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 Garmin 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 Garmin, you can compare the effects of market volatilities on Luna Innovations and Garmin 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 Garmin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luna Innovations and Garmin.

Diversification Opportunities for Luna Innovations and Garmin

-0.48

Correlation Coefficient

Luna Innovations  Garmin

Very good diversification

The 3 months correlation between Luna and Garmin is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Garmin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garmin 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 Garmin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garmin has no effect on the direction of Luna Innovations i.e., Luna Innovations and Garmin go up and down completely randomly.

Pair Corralation between Luna Innovations and Garmin

Given the investment horizon of 90 days Luna Innovations Incorporated is expected to under-perform the Garmin. In addition to that, Luna Innovations is 4.49 times more volatile than Garmin. It trades about -0.06 of its total potential returns per unit of risk. Garmin is currently generating about 0.02 per unit of volatility. If you would invest  20,838  in Garmin on September 22, 2024 and sell it today you would earn a total of  61.00  from holding Garmin or generate 0.29% return on investment over 90 days.

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

Luna Innovations Incorporated  vs.  Garmin

Luna Innovations

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Garmin

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luna Innovations and Garmin

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

The idea behind Luna Innovations Incorporated and Garmin 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.