Correlation Between Liquidity Services and Hour Loop

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

By analyzing existing cross correlation between Liquidity Services and Hour Loop, you can compare the effects of market volatilities on Liquidity Services and Hour Loop 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 Liquidity Services with a short position of Hour Loop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liquidity Services and Hour Loop.

Diversification Opportunities for Liquidity Services and Hour Loop

0.45

Correlation Coefficient

Liquidity Services  Hour Loop

Very weak diversification

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

Pair Corralation between Liquidity Services and Hour Loop

Given the investment horizon of 90 days Liquidity Services is expected to generate 1.14 times less return on investment than Hour Loop. But when comparing it to its historical volatility, Liquidity Services is 2.87 times less risky than Hour Loop. It trades about 0.17 of its potential returns per unit of risk. Hour Loop is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Hour Loop on September 5, 2024 and sell it today you would earn a total of  18.00  from holding Hour Loop or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Liquidity Services  vs.  Hour Loop

Liquidity Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidity Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Liquidity Services unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hour Loop

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liquidity Services and Hour Loop

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

The idea behind Liquidity Services and Hour Loop 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.