Correlation Between LiCycle Holdings and Flexible Solutions

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

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

Diversification Opportunities for LiCycle Holdings and Flexible Solutions

-0.59

Correlation Coefficient

LiCycle Holdings  Flexible Solutions

Excellent diversification

The 3 months correlation between LiCycle and Flexible is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and LiCycle Holdings 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 LiCycle Holdings Corp are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of LiCycle Holdings i.e., LiCycle Holdings and Flexible Solutions go up and down completely randomly.

Pair Corralation between LiCycle Holdings and Flexible Solutions

Given the investment horizon of 90 days LiCycle Holdings Corp is expected to generate 4.05 times more return on investment than Flexible Solutions. However, LiCycle Holdings is 4.05 times more volatile than Flexible Solutions International. It trades about -0.02 of its potential returns per unit of risk. Flexible Solutions International is currently generating about -0.22 per unit of risk. If you would invest  476.00  in LiCycle Holdings Corp on March 17, 2024 and sell it today you would lose (52.00) from holding LiCycle Holdings Corp or give up 10.92% of portfolio value over 90 days.

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

LiCycle Holdings Corp  vs.  Flexible Solutions Internation

LiCycle Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Flexible Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with LiCycle Holdings and Flexible Solutions

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

The idea behind LiCycle Holdings Corp and Flexible Solutions International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.