Correlation Between Kidpik Corp and Liquidity Services

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

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

Diversification Opportunities for Kidpik Corp and Liquidity Services

0.06

Correlation Coefficient

Kidpik Corp  Liquidity Services

Significant diversification

The 3 months correlation between Kidpik and Liquidity is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kidpik Corp and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and Kidpik Corp 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 Kidpik Corp are associated (or correlated) with Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of Kidpik Corp i.e., Kidpik Corp and Liquidity Services go up and down completely randomly.

Pair Corralation between Kidpik Corp and Liquidity Services

Considering the 90-day investment horizon Kidpik Corp is expected to generate 1.53 times less return on investment than Liquidity Services. In addition to that, Kidpik Corp is 4.56 times more volatile than Liquidity Services. It trades about 0.0 of its total potential returns per unit of risk. Liquidity Services is currently generating about 0.02 per unit of volatility. If you would invest  2,177  in Liquidity Services on August 7, 2024 and sell it today you would earn a total of  9.00  from holding Liquidity Services or generate 0.41% return on investment over 90 days.

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

Kidpik Corp  vs.  Liquidity Services

Kidpik Corp

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Kidpik Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Kidpik Corp is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Liquidity Services

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidity Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Liquidity Services may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kidpik Corp and Liquidity Services

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

The idea behind Kidpik Corp and Liquidity Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.