Correlation Between Liquidity Services and Purple Innovation

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

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

Diversification Opportunities for Liquidity Services and Purple Innovation

-0.27

Correlation Coefficient

Liquidity Services  Purple Innovation

Very good diversification

The 3 months correlation between Liquidity and Purple is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Purple Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Innovation 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 Purple Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Innovation has no effect on the direction of Liquidity Services i.e., Liquidity Services and Purple Innovation go up and down completely randomly.

Pair Corralation between Liquidity Services and Purple Innovation

Given the investment horizon of 90 days Liquidity Services is expected to under-perform the Purple Innovation. But the stock apears to be less risky and, when comparing its historical volatility, Liquidity Services is 2.02 times less risky than Purple Innovation. The stock trades about -0.14 of its potential returns per unit of risk. The Purple Innovation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Purple Innovation on May 7, 2025 and sell it today you would earn a total of  3.00  from holding Purple Innovation or generate 3.66% return on investment over 90 days.

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

Liquidity Services  vs.  Purple Innovation

Liquidity Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liquidity Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in September 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Purple Innovation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Purple Innovation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Purple Innovation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liquidity Services and Purple Innovation

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

The idea behind Liquidity Services and Purple Innovation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.