Correlation Between Timken and Lucid

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

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

Diversification Opportunities for Timken and Lucid

0.6

Correlation Coefficient

Timken  Lucid

Poor diversification

The 3 months correlation between Timken and Lucid is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group and Timken 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 Timken Company 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 Timken i.e., Timken and Lucid go up and down completely randomly.

Pair Corralation between Timken and Lucid

Considering the 90-day investment horizon Timken Company is expected to generate 0.37 times more return on investment than Lucid. However, Timken Company is 2.67 times less risky than Lucid. It trades about 0.01 of its potential returns per unit of risk. Lucid Group is currently generating about -0.01 per unit of risk. If you would invest  6,834  in Timken Company on September 20, 2024 and sell it today you would earn a total of  307.00  from holding Timken Company or generate 4.49% return on investment over 90 days.

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

Timken Company  vs.  Lucid Group

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Timken and Lucid

The main advantage of trading using opposite Timken and Lucid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken 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 Timken Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.