Correlation Between LiCycle Holdings and Clorox

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

By analyzing existing cross correlation between LiCycle Holdings Corp and The Clorox, you can compare the effects of market volatilities on LiCycle Holdings and Clorox 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 LiCycle Holdings with a short position of Clorox. Check out your portfolio center. Please also check ongoing floating volatility patterns of LiCycle Holdings and Clorox.

Diversification Opportunities for LiCycle Holdings and Clorox

-0.29

Correlation Coefficient

LiCycle Holdings  Clorox

Very good diversification

The 3 months correlation between LiCycle and Clorox is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and LiCycle Holdings 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 LiCycle Holdings Corp are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of LiCycle Holdings i.e., LiCycle Holdings and Clorox go up and down completely randomly.

Pair Corralation between LiCycle Holdings and Clorox

Given the investment horizon of 90 days LiCycle Holdings Corp is expected to generate 7.57 times more return on investment than Clorox. However, LiCycle Holdings is 7.57 times more volatile than The Clorox. It trades about 0.03 of its potential returns per unit of risk. The Clorox is currently generating about 0.07 per unit of risk. If you would invest  528.00  in LiCycle Holdings Corp on August 10, 2024 and sell it today you would lose (167.00) from holding LiCycle Holdings Corp or give up 31.63% of portfolio value over 90 days.

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

LiCycle Holdings Corp  vs.  The Clorox

LiCycle Holdings Corp

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LiCycle Holdings Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, LiCycle Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Clorox

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Clorox are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Clorox showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LiCycle Holdings and Clorox

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

The idea behind LiCycle Holdings Corp and The Clorox 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.