Correlation Between Lucid and Niagara Mohawk

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

By analyzing existing cross correlation between Lucid Group and Niagara Mohawk Power, you can compare the effects of market volatilities on Lucid and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Niagara Mohawk.

Diversification Opportunities for Lucid and Niagara Mohawk

-0.59

Correlation Coefficient

Lucid  Niagara Mohawk

Excellent diversification

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

Pair Corralation between Lucid and Niagara Mohawk

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Niagara Mohawk. In addition to that, Lucid is 5.29 times more volatile than Niagara Mohawk Power. It trades about -0.2 of its total potential returns per unit of risk. Niagara Mohawk Power is currently generating about 0.18 per unit of volatility. If you would invest  5,700  in Niagara Mohawk Power on August 31, 2024 and sell it today you would earn a total of  500.00  from holding Niagara Mohawk Power or generate 8.77% return on investment over 90 days.

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

Lucid Group  vs.  Niagara Mohawk Power

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 unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Niagara Mohawk Power

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Niagara Mohawk may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Lucid and Niagara Mohawk

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

The idea behind Lucid Group and Niagara Mohawk Power 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.