Correlation Between Lizhi and Primo Brands

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

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

Diversification Opportunities for Lizhi and Primo Brands

-0.2

Correlation Coefficient

Lizhi  Primo Brands

Good diversification

The 3 months correlation between Lizhi and Primo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lizhi Inc and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands and Lizhi 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 Lizhi Inc are associated (or correlated) with Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Lizhi i.e., Lizhi and Primo Brands go up and down completely randomly.

Pair Corralation between Lizhi and Primo Brands

Given the investment horizon of 90 days Lizhi Inc is expected to generate 2.18 times more return on investment than Primo Brands. However, Lizhi is 2.18 times more volatile than Primo Brands. It trades about 0.04 of its potential returns per unit of risk. Primo Brands is currently generating about 0.01 per unit of risk. If you would invest  210.00  in Lizhi Inc on January 27, 2025 and sell it today you would earn a total of  11.00  from holding Lizhi Inc or generate 5.24% return on investment over 90 days.

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

Lizhi Inc  vs.  Primo Brands

Lizhi Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lizhi Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Lizhi may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Primo Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Primo Brands is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lizhi and Primo Brands

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

The idea behind Lizhi Inc and Primo Brands 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.