Correlation Between Deluxe and Liquidity Services
Can any of the company-specific risk be diversified away by investing in both Deluxe 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 Deluxe and Liquidity Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deluxe and Liquidity Services, you can compare the effects of market volatilities on Deluxe 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 Deluxe with a short position of Liquidity Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and Liquidity Services.
Diversification Opportunities for Deluxe and Liquidity Services
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Deluxe and Liquidity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and Liquidity Services go up and down completely randomly.
Pair Corralation between Deluxe and Liquidity Services
Considering the 90-day investment horizon Deluxe is expected to generate 1.37 times more return on investment than Liquidity Services. However, Deluxe is 1.37 times more volatile than Liquidity Services. It trades about 0.11 of its potential returns per unit of risk. Liquidity Services is currently generating about 0.11 per unit of risk. If you would invest 1,923 in Deluxe on March 17, 2024 and sell it today you would earn a total of 263.00 from holding Deluxe or generate 13.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Deluxe vs. Liquidity Services
Performance |
Timeline |
Deluxe |
Liquidity Services |
Deluxe and Liquidity Services Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deluxe and Liquidity Services
The main advantage of trading using opposite Deluxe and Liquidity Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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.Deluxe vs. Criteo Sa | Deluxe vs. Emerald Expositions Events | Deluxe vs. Marchex | Deluxe vs. Integral Ad Science |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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