Correlation Between Luminar Technologies and Worksport

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

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

Diversification Opportunities for Luminar Technologies and Worksport

-0.48

Correlation Coefficient

Luminar Technologies  Worksport

Very good diversification

The 3 months correlation between Luminar and Worksport is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Luminar Technologies and Worksport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worksport 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 Worksport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worksport has no effect on the direction of Luminar Technologies i.e., Luminar Technologies and Worksport go up and down completely randomly.

Pair Corralation between Luminar Technologies and Worksport

Given the investment horizon of 90 days Luminar Technologies is expected to under-perform the Worksport. But the stock apears to be less risky and, when comparing its historical volatility, Luminar Technologies is 1.08 times less risky than Worksport. The stock trades about -0.06 of its potential returns per unit of risk. The Worksport is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Worksport on September 28, 2024 and sell it today you would lose (65.00) from holding Worksport or give up 41.4% of portfolio value over 90 days.

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

Luminar Technologies  vs.  Worksport

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 fragile 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.

Worksport

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worksport are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Worksport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luminar Technologies and Worksport

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

The idea behind Luminar Technologies and Worksport 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.