Correlation Between Luminar Technologies and Magna International

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

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

Diversification Opportunities for Luminar Technologies and Magna International

-0.57

Correlation Coefficient

Luminar Technologies  Magna International

Excellent diversification

The 3 months correlation between Luminar and Magna is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Luminar Technologies 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 Luminar Technologies are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Magna International go up and down completely randomly.

Pair Corralation between Luminar Technologies and Magna International

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the Magna International. In addition to that, Luminar Technologies is 3.28 times more volatile than Magna International. It trades about -0.63 of its total potential returns per unit of risk. Magna International is currently generating about 0.04 per unit of volatility. If you would invest  4,371  in Magna International on September 14, 2024 and sell it today you would earn a total of  50.00  from holding Magna International or generate 1.14% return on investment over 90 days.

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

Luminar Technologies  vs.  Magna International

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.

Magna International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Magna International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luminar Technologies and Magna International

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

The idea behind Luminar Technologies and Magna International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.