Correlation Between Volcon and Lear

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

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

Diversification Opportunities for Volcon and Lear

0.83

Correlation Coefficient

Volcon  Lear

Very poor diversification

The 3 months correlation between Volcon and Lear is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Volcon 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 Volcon Inc are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Volcon i.e., Volcon and Lear go up and down completely randomly.

Pair Corralation between Volcon and Lear

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Lear. In addition to that, Volcon is 3.73 times more volatile than Lear Corporation. It trades about -0.17 of its total potential returns per unit of risk. Lear Corporation is currently generating about -0.11 per unit of volatility. If you would invest  11,356  in Lear Corporation on September 1, 2024 and sell it today you would lose (1,572) from holding Lear Corporation or give up 13.84% of portfolio value over 90 days.

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

Volcon Inc  vs.  Lear Corp.

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc 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 fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Volcon and Lear

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

The idea behind Volcon Inc and Lear Corporation 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.