Correlation Between Trimble and Luna Innovations
Can any of the company-specific risk be diversified away by investing in both Trimble and Luna Innovations 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 Trimble and Luna Innovations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trimble and Luna Innovations Incorporated, you can compare the effects of market volatilities on Trimble and Luna Innovations 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 Trimble with a short position of Luna Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trimble and Luna Innovations.
Diversification Opportunities for Trimble and Luna Innovations
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Trimble and Luna is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Luna Innovations Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luna Innovations and Trimble 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 Trimble are associated (or correlated) with Luna Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luna Innovations has no effect on the direction of Trimble i.e., Trimble and Luna Innovations go up and down completely randomly.
Pair Corralation between Trimble and Luna Innovations
Given the investment horizon of 90 days Trimble is expected to generate 0.87 times more return on investment than Luna Innovations. However, Trimble is 1.15 times less risky than Luna Innovations. It trades about 0.22 of its potential returns per unit of risk. Luna Innovations Incorporated is currently generating about 0.06 per unit of risk. If you would invest 6,135 in Trimble on August 28, 2024 and sell it today you would earn a total of 1,160 from holding Trimble or generate 18.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trimble vs. Luna Innovations Incorporated
Performance |
| Timeline |
| Trimble |
| Luna Innovations |
Trimble and Luna Innovations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trimble and Luna Innovations
The main advantage of trading using opposite Trimble and Luna Innovations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble position performs unexpectedly, Luna Innovations 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 Luna Innovations will offset losses from the drop in Luna Innovations' long position.The idea behind Trimble and Luna Innovations Incorporated 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.| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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