Correlation Between Luna Innovations and Keysight Technologies

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

By analyzing existing cross correlation between Luna Innovations Incorporated and Keysight Technologies, you can compare the effects of market volatilities on Luna Innovations and Keysight Technologies 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 Luna Innovations with a short position of Keysight Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luna Innovations and Keysight Technologies.

Diversification Opportunities for Luna Innovations and Keysight Technologies

-0.52

Correlation Coefficient

Luna Innovations  Keysight Technologies

Excellent diversification

The 3 months correlation between Luna and Keysight is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Luna Innovations Incorporated and Keysight Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keysight Technologies and Luna Innovations 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 Luna Innovations Incorporated are associated (or correlated) with Keysight Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keysight Technologies has no effect on the direction of Luna Innovations i.e., Luna Innovations and Keysight Technologies go up and down completely randomly.

Pair Corralation between Luna Innovations and Keysight Technologies

Given the investment horizon of 90 days Luna Innovations Incorporated is expected to under-perform the Keysight Technologies. In addition to that, Luna Innovations is 4.25 times more volatile than Keysight Technologies. It trades about -0.04 of its total potential returns per unit of risk. Keysight Technologies is currently generating about -0.07 per unit of volatility. If you would invest  13,848  in Keysight Technologies on April 1, 2024 and sell it today you would lose (173.00) from holding Keysight Technologies or give up 1.25% of portfolio value over 90 days.

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

Luna Innovations Incorporated  vs.  Keysight Technologies

Luna Innovations

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luna Innovations Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Luna Innovations sustained solid returns over the last few months and may actually be approaching a breakup point.

Keysight Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keysight Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Luna Innovations and Keysight Technologies

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

The idea behind Luna Innovations Incorporated and Keysight Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.