Correlation Between Sea and Lucid
Can any of the company-specific risk be diversified away by investing in both Sea and Lucid 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 Sea and Lucid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Lucid Group, you can compare the effects of market volatilities on Sea and Lucid 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 Sea with a short position of Lucid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Lucid.
Diversification Opportunities for Sea and Lucid
Average diversification
The 3 months correlation between Sea and Lucid is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group and Sea 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 Sea are associated (or correlated) with Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of Sea i.e., Sea and Lucid go up and down completely randomly.
Pair Corralation between Sea and Lucid
Allowing for the 90-day total investment horizon Sea is expected to generate 0.43 times more return on investment than Lucid. However, Sea is 2.34 times less risky than Lucid. It trades about 0.26 of its potential returns per unit of risk. Lucid Group is currently generating about -0.03 per unit of risk. If you would invest 11,423 in Sea on November 28, 2024 and sell it today you would earn a total of 1,443 from holding Sea or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sea vs. Lucid Group
Performance |
| Timeline |
| Sea |
| Lucid Group |
Sea and Lucid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Lucid
The main advantage of trading using opposite Sea and Lucid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, Lucid 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 Lucid will offset losses from the drop in Lucid's long position.The idea behind Sea and Lucid Group 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.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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