Correlation Between Safe Bulkers and LiCycle Holdings

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

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

Diversification Opportunities for Safe Bulkers and LiCycle Holdings

-0.43

Correlation Coefficient

Safe Bulkers  LiCycle Holdings

Very good diversification

The 3 months correlation between Safe and LiCycle is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp and Safe Bulkers 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 Safe Bulkers are associated (or correlated) with LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and LiCycle Holdings go up and down completely randomly.

Pair Corralation between Safe Bulkers and LiCycle Holdings

Allowing for the 90-day total investment horizon Safe Bulkers is expected to under-perform the LiCycle Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Safe Bulkers is 6.53 times less risky than LiCycle Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The LiCycle Holdings Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  209.00  in LiCycle Holdings Corp on August 27, 2024 and sell it today you would earn a total of  6.00  from holding LiCycle Holdings Corp or generate 2.87% return on investment over 90 days.

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

Safe Bulkers  vs.  LiCycle Holdings Corp

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

LiCycle Holdings Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LiCycle Holdings Corp are ranked lower than 6 (%) 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.

Pair Trading with Safe Bulkers and LiCycle Holdings

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

The idea behind Safe Bulkers and LiCycle Holdings Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.