Correlation Between Lightning EMotors and AGCO

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

By analyzing existing cross correlation between Lightning eMotors and AGCO Corporation, you can compare the effects of market volatilities on Lightning EMotors and AGCO 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 Lightning EMotors with a short position of AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lightning EMotors and AGCO.

Diversification Opportunities for Lightning EMotors and AGCO

-0.44

Correlation Coefficient

Lightning EMotors  AGCO

Very good diversification

The 3 months correlation between Lightning and AGCO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lightning eMotors and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO and Lightning EMotors 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 Lightning eMotors are associated (or correlated) with AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Lightning EMotors i.e., Lightning EMotors and AGCO go up and down completely randomly.

Pair Corralation between Lightning EMotors and AGCO

Assuming the 90 days horizon Lightning eMotors is expected to generate 25.75 times more return on investment than AGCO. However, Lightning EMotors is 25.75 times more volatile than AGCO Corporation. It trades about 0.14 of its potential returns per unit of risk. AGCO Corporation is currently generating about 0.0 per unit of risk. If you would invest  1.99  in Lightning eMotors on February 28, 2024 and sell it today you would lose (1.88) from holding Lightning eMotors or give up 94.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	18.38%
Values	Daily Returns

Lightning eMotors  vs.  AGCO Corp.

Lightning eMotors

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Lightning eMotors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Lightning EMotors showed solid returns over the last few months and may actually be approaching a breakup point.

AGCO

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days AGCO Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lightning EMotors and AGCO

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

The idea behind Lightning eMotors and AGCO Corporation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.