Correlation Between Luna Innovations and Astrotech Corp

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

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

Diversification Opportunities for Luna Innovations and Astrotech Corp

0.72

Correlation Coefficient

Luna Innovations  Astrotech Corp

Poor diversification

The 3 months correlation between Luna and Astrotech is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Astrotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astrotech Corp and Luna Innovations 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 Luna Innovations Incorporated are associated (or correlated) with Astrotech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astrotech Corp has no effect on the direction of Luna Innovations i.e., Luna Innovations and Astrotech Corp go up and down completely randomly.

Pair Corralation between Luna Innovations and Astrotech Corp

Given the investment horizon of 90 days Luna Innovations Incorporated is expected to generate 1.56 times more return on investment than Astrotech Corp. However, Luna Innovations is 1.56 times more volatile than Astrotech Corp. It trades about -0.01 of its potential returns per unit of risk. Astrotech Corp is currently generating about -0.15 per unit of risk. If you would invest  228.00  in Luna Innovations Incorporated on September 4, 2024 and sell it today you would lose (32.00) from holding Luna Innovations Incorporated or give up 14.04% of portfolio value over 90 days.

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

Luna Innovations Incorporated  vs.  Astrotech Corp

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 somewhat strong basic indicators, Luna Innovations is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Astrotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astrotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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.

Pair Trading with Luna Innovations and Astrotech Corp

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

The idea behind Luna Innovations Incorporated and Astrotech Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.