Correlation Between Lucid and GM

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

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

Diversification Opportunities for Lucid and GM

-0.78

Correlation Coefficient

Lucid  GM

Pay attention - limited upside

The 3 months correlation between Lucid and GM is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Lucid i.e., Lucid and GM go up and down completely randomly.

Pair Corralation between Lucid and GM

Given the investment horizon of 90 days Lucid Group is expected to generate 1.9 times more return on investment than GM. However, Lucid is 1.9 times more volatile than General Motors. It trades about 0.09 of its potential returns per unit of risk. General Motors is currently generating about 0.09 per unit of risk. If you would invest  265.00  in Lucid Group on February 4, 2024 and sell it today you would earn a total of  13.50  from holding Lucid Group or generate 5.09% return on investment over 90 days.

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

Lucid Group  vs.  General Motors

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 latest unfluctuating performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

General Motors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucid and GM

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

The idea behind Lucid Group and General Motors 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.