Correlation Between Lucid and NWTN Warrant

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Can any of the company-specific risk be diversified away by investing in both Lucid and NWTN Warrant 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 NWTN Warrant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucid Group and NWTN Warrant, you can compare the effects of market volatilities on Lucid and NWTN Warrant 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 NWTN Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and NWTN Warrant.

Diversification Opportunities for Lucid and NWTN Warrant

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Lucid and NWTN is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and NWTN Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Warrant 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 NWTN Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Warrant has no effect on the direction of Lucid i.e., Lucid and NWTN Warrant go up and down completely randomly.

Pair Corralation between Lucid and NWTN Warrant

Given the investment horizon of 90 days Lucid Group is expected to under-perform the NWTN Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Lucid Group is 6.22 times less risky than NWTN Warrant. The stock trades about -0.07 of its potential returns per unit of risk. The NWTN Warrant is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.92  in NWTN Warrant on August 31, 2024 and sell it today you would lose (1.31) from holding NWTN Warrant or give up 22.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Lucid Group  vs.  NWTN Warrant

 Performance 
       Timeline  
Lucid Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
NWTN Warrant 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Warrant are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NWTN Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Lucid and NWTN Warrant Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lucid and NWTN Warrant

The main advantage of trading using opposite Lucid and NWTN Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid position performs unexpectedly, NWTN Warrant 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 NWTN Warrant will offset losses from the drop in NWTN Warrant's long position.
The idea behind Lucid Group and NWTN Warrant 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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