Correlation Between Luna Innovations and Cepton
Can any of the company-specific risk be diversified away by investing in both Luna Innovations and Cepton 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 Cepton 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 Cepton Inc, you can compare the effects of market volatilities on Luna Innovations and Cepton 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 Cepton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luna Innovations and Cepton.
Diversification Opportunities for Luna Innovations and Cepton
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Luna and Cepton is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Cepton Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cepton Inc 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 Cepton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cepton Inc has no effect on the direction of Luna Innovations i.e., Luna Innovations and Cepton go up and down completely randomly.
Pair Corralation between Luna Innovations and Cepton
Given the investment horizon of 90 days Luna Innovations Incorporated is expected to generate 11.69 times more return on investment than Cepton. However, Luna Innovations is 11.69 times more volatile than Cepton Inc. It trades about 0.06 of its potential returns per unit of risk. Cepton Inc is currently generating about -0.11 per unit of risk. If you would invest 181.00 in Luna Innovations Incorporated on August 28, 2024 and sell it today you would earn a total of 7.00 from holding Luna Innovations Incorporated or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Luna Innovations Incorporated vs. Cepton Inc
Performance |
| Timeline |
| Luna Innovations |
| Cepton Inc |
Luna Innovations and Cepton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luna Innovations and Cepton
The main advantage of trading using opposite Luna Innovations and Cepton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luna Innovations position performs unexpectedly, Cepton 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 Cepton will offset losses from the drop in Cepton's long position.| Luna Innovations vs. ESCO Technologies | Luna Innovations vs. Know Labs | Luna Innovations vs. Focus Universal | Luna Innovations vs. Sono Tek Corp |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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