Correlation Between Lucid and NextTrip
Can any of the company-specific risk be diversified away by investing in both Lucid and NextTrip 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 NextTrip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucid Group and NextTrip, you can compare the effects of market volatilities on Lucid and NextTrip 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 NextTrip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and NextTrip.
Diversification Opportunities for Lucid and NextTrip
Poor diversification
The 3 months correlation between Lucid and NextTrip is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip 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 NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Lucid i.e., Lucid and NextTrip go up and down completely randomly.
Pair Corralation between Lucid and NextTrip
Given the investment horizon of 90 days Lucid Group is expected to under-perform the NextTrip. But the stock apears to be less risky and, when comparing its historical volatility, Lucid Group is 4.34 times less risky than NextTrip. The stock trades about -0.05 of its potential returns per unit of risk. The NextTrip is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 185.00 in NextTrip on September 5, 2024 and sell it today you would earn a total of 169.00 from holding NextTrip or generate 91.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lucid Group vs. NextTrip
Performance |
| Timeline |
| Lucid Group |
| NextTrip |
Lucid and NextTrip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucid and NextTrip
The main advantage of trading using opposite Lucid and NextTrip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid position performs unexpectedly, NextTrip 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 NextTrip will offset losses from the drop in NextTrip's long position.The idea behind Lucid Group and NextTrip 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.| NextTrip vs. Wabash National | NextTrip vs. Li Auto | NextTrip vs. Lucid Group | NextTrip vs. Marine Products |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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