Correlation Between PACCAR and Lucid

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

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

Diversification Opportunities for PACCAR and Lucid

-0.38

Correlation Coefficient

PACCAR  Lucid

Very good diversification

The 3 months correlation between PACCAR and Lucid is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group and PACCAR 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 PACCAR Inc are associated (or correlated) with Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of PACCAR i.e., PACCAR and Lucid go up and down completely randomly.

Pair Corralation between PACCAR and Lucid

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.34 times more return on investment than Lucid. However, PACCAR Inc is 2.92 times less risky than Lucid. It trades about 0.07 of its potential returns per unit of risk. Lucid Group is currently generating about -0.18 per unit of risk. If you would invest  10,625  in PACCAR Inc on December 11, 2024 and sell it today you would earn a total of  431.00  from holding PACCAR Inc or generate 4.06% return on investment over 90 days.

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

PACCAR Inc  vs.  Lucid Group

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 latest unfluctuating performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PACCAR and Lucid

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

The idea behind PACCAR Inc and Lucid Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.