Correlation Between Westinghouse Air and Lucid

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

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

Diversification Opportunities for Westinghouse Air and Lucid

-0.8

Correlation Coefficient

Westinghouse Air  Lucid

Pay attention - limited upside

The 3 months correlation between Westinghouse and Lucid is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group and Westinghouse Air 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 Westinghouse Air Brake 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 Westinghouse Air i.e., Westinghouse Air and Lucid go up and down completely randomly.

Pair Corralation between Westinghouse Air and Lucid

Considering the 90-day investment horizon Westinghouse Air is expected to generate 1.84 times less return on investment than Lucid. But when comparing it to its historical volatility, Westinghouse Air Brake is 4.1 times less risky than Lucid. It trades about 0.11 of its potential returns per unit of risk. Lucid Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Lucid Group on September 22, 2024 and sell it today you would earn a total of  46.00  from holding Lucid Group or generate 17.97% return on investment over 90 days.

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

Westinghouse Air Brake  vs.  Lucid Group

Westinghouse Air Brake

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westinghouse Air Brake are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Westinghouse Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 rather sound forward indicators, Lucid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Westinghouse Air and Lucid

The main advantage of trading using opposite Westinghouse Air and Lucid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air 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 Westinghouse Air Brake 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.