Correlation Between Know Labs and Luna Innovations

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

By analyzing existing cross correlation between Know Labs and Luna Innovations Incorporated, you can compare the effects of market volatilities on Know Labs and Luna Innovations 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 Know Labs with a short position of Luna Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know Labs and Luna Innovations.

Diversification Opportunities for Know Labs and Luna Innovations

0.8

Correlation Coefficient

Know Labs  Luna Innovations

Very poor diversification

The 3 months correlation between Know and Luna is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Know Labs and Luna Innovations Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luna Innovations and Know Labs 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 Know Labs are associated (or correlated) with Luna Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luna Innovations has no effect on the direction of Know Labs i.e., Know Labs and Luna Innovations go up and down completely randomly.

Pair Corralation between Know Labs and Luna Innovations

Considering the 90-day investment horizon Know Labs is expected to generate 1.13 times more return on investment than Luna Innovations. However, Know Labs is 1.13 times more volatile than Luna Innovations Incorporated. It trades about 0.14 of its potential returns per unit of risk. Luna Innovations Incorporated is currently generating about 0.06 per unit of risk. If you would invest  21.00  in Know Labs on August 30, 2024 and sell it today you would earn a total of  3.00  from holding Know Labs or generate 14.29% return on investment over 90 days.

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

Know Labs  vs.  Luna Innovations Incorporated

Know Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know Labs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Know Labs and Luna Innovations

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

The idea behind Know Labs and Luna Innovations Incorporated 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.