Correlation Between Lucid and Amazon

Can any of the company-specific risk be diversified away by investing in both Lucid and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lucid Group and Amazon Inc, you can compare the effects of market volatilities on Lucid and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and Amazon.

Diversification Opportunities for Lucid and Amazon

-0.45

Correlation Coefficient

Lucid  Amazon

Very good diversification

The 3 months correlation between Lucid and Amazon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Lucid i.e., Lucid and Amazon go up and down completely randomly.

Pair Corralation between Lucid and Amazon

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Amazon. In addition to that, Lucid is 2.17 times more volatile than Amazon Inc. It trades about -0.05 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.05 per unit of volatility. If you would invest  12,235  in Amazon Inc on February 23, 2024 and sell it today you would earn a total of  5,870  from holding Amazon Inc or generate 47.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lucid Group  vs.  Amazon Inc

Lucid Group

Risk-Adjusted Performance

0 of 100

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 rather sound forward indicators, Lucid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Amazon Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lucid and Amazon

The main advantage of trading using opposite Lucid and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.

The idea behind Lucid Group and Amazon Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.