Correlation Between Luna Innovations and Spectris Plc
Can any of the company-specific risk be diversified away by investing in both Luna Innovations and Spectris Plc 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 Spectris Plc 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 Spectris plc, you can compare the effects of market volatilities on Luna Innovations and Spectris Plc 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 Spectris Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luna Innovations and Spectris Plc.
Diversification Opportunities for Luna Innovations and Spectris Plc
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Luna and Spectris is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Spectris plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectris plc 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 Spectris Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectris plc has no effect on the direction of Luna Innovations i.e., Luna Innovations and Spectris Plc go up and down completely randomly.
Pair Corralation between Luna Innovations and Spectris Plc
Given the investment horizon of 90 days Luna Innovations Incorporated is expected to under-perform the Spectris Plc. In addition to that, Luna Innovations is 1.57 times more volatile than Spectris plc. It trades about -0.06 of its total potential returns per unit of risk. Spectris plc is currently generating about -0.01 per unit of volatility. If you would invest 4,354 in Spectris plc on August 28, 2024 and sell it today you would lose (1,074) from holding Spectris plc or give up 24.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.4% |
| Values | Daily Returns |
Luna Innovations Incorporated vs. Spectris plc
Performance |
| Timeline |
| Luna Innovations |
| Spectris plc |
Luna Innovations and Spectris Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luna Innovations and Spectris Plc
The main advantage of trading using opposite Luna Innovations and Spectris Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luna Innovations position performs unexpectedly, Spectris Plc 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 Spectris Plc will offset losses from the drop in Spectris Plc's long position.| Luna Innovations vs. ESCO Technologies | Luna Innovations vs. Know Labs | Luna Innovations vs. Focus Universal | Luna Innovations vs. Sono Tek Corp |
| Spectris Plc vs. Track Group | Spectris Plc vs. Sono Tek Corp | Spectris Plc vs. Mind Technology | Spectris Plc vs. Electro Sensors |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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