Correlation Between AGCO and Lightning EMotors
Can any of the company-specific risk be diversified away by investing in both AGCO and Lightning EMotors 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 AGCO and Lightning EMotors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGCO Corporation and Lightning EMotors, you can compare the effects of market volatilities on AGCO and Lightning EMotors 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 AGCO with a short position of Lightning EMotors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGCO and Lightning EMotors.
Diversification Opportunities for AGCO and Lightning EMotors
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AGCO and Lightning is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Lightning EMotors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightning EMotors and AGCO 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 AGCO Corporation are associated (or correlated) with Lightning EMotors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightning EMotors has no effect on the direction of AGCO i.e., AGCO and Lightning EMotors go up and down completely randomly.
Pair Corralation between AGCO and Lightning EMotors
Given the investment horizon of 90 days AGCO Corporation is expected to generate 0.21 times more return on investment than Lightning EMotors. However, AGCO Corporation is 4.77 times less risky than Lightning EMotors. It trades about -0.02 of its potential returns per unit of risk. Lightning EMotors is currently generating about -0.04 per unit of risk. If you would invest 12,550 in AGCO Corporation on August 31, 2024 and sell it today you would lose (2,404) from holding AGCO Corporation or give up 19.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 28.51% |
| Values | Daily Returns |
AGCO Corp. vs. Lightning EMotors
Performance |
| Timeline |
| AGCO |
| Lightning EMotors |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
AGCO and Lightning EMotors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGCO and Lightning EMotors
The main advantage of trading using opposite AGCO and Lightning EMotors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGCO position performs unexpectedly, Lightning EMotors 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 Lightning EMotors will offset losses from the drop in Lightning EMotors' long position.The idea behind AGCO Corporation and Lightning EMotors 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.| Lightning EMotors vs. Lion Electric Corp | Lightning EMotors vs. American Premium Water | Lightning EMotors vs. Wabash National | Lightning EMotors vs. Titan International |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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