Correlation Between Dana and Luminar Technologies

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

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

Diversification Opportunities for Dana and Luminar Technologies

-0.59

Correlation Coefficient

Dana  Luminar Technologies

Excellent diversification

The 3 months correlation between Dana and Luminar is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Luminar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luminar Technologies and Dana 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 Dana Inc are associated (or correlated) with Luminar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luminar Technologies has no effect on the direction of Dana i.e., Dana and Luminar Technologies go up and down completely randomly.

Pair Corralation between Dana and Luminar Technologies

Considering the 90-day investment horizon Dana Inc is expected to generate 0.72 times more return on investment than Luminar Technologies. However, Dana Inc is 1.39 times less risky than Luminar Technologies. It trades about 0.46 of its potential returns per unit of risk. Luminar Technologies is currently generating about -0.58 per unit of risk. If you would invest  855.00  in Dana Inc on September 14, 2024 and sell it today you would earn a total of  397.00  from holding Dana Inc or generate 46.43% return on investment over 90 days.

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

Dana Inc  vs.  Luminar Technologies

Dana Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Luminar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luminar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dana and Luminar Technologies

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

The idea behind Dana Inc and Luminar Technologies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.