Correlation Between Lucid and Beaver Coal

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

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

Diversification Opportunities for Lucid and Beaver Coal

-0.63

Correlation Coefficient

Lucid  Beaver Coal

Excellent diversification

The 3 months correlation between Lucid and Beaver is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Beaver Coal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beaver Coal and Lucid 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 Lucid Group are associated (or correlated) with Beaver Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beaver Coal has no effect on the direction of Lucid i.e., Lucid and Beaver Coal go up and down completely randomly.

Pair Corralation between Lucid and Beaver Coal

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Beaver Coal. In addition to that, Lucid is 2.69 times more volatile than Beaver Coal Co. It trades about -0.14 of its total potential returns per unit of risk. Beaver Coal Co is currently generating about 0.12 per unit of volatility. If you would invest  298,500  in Beaver Coal Co on September 13, 2024 and sell it today you would earn a total of  36,500  from holding Beaver Coal Co or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Lucid Group  vs.  Beaver Coal Co

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 weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Beaver Coal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beaver Coal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Beaver Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lucid and Beaver Coal

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

The idea behind Lucid Group and Beaver Coal Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.