Correlation Between LightInTheBox Holding and Carvana

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

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

Diversification Opportunities for LightInTheBox Holding and Carvana

-0.8

Correlation Coefficient

LightInTheBox Holding  Carvana

Pay attention - limited upside

The 3 months correlation between LightInTheBox and Carvana is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding LightInTheBox Holding Co and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana and LightInTheBox Holding 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 LightInTheBox Holding Co are associated (or correlated) with Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of LightInTheBox Holding i.e., LightInTheBox Holding and Carvana go up and down completely randomly.

Pair Corralation between LightInTheBox Holding and Carvana

Given the investment horizon of 90 days LightInTheBox Holding Co is expected to under-perform the Carvana. But the stock apears to be less risky and, when comparing its historical volatility, LightInTheBox Holding Co is 2.27 times less risky than Carvana. The stock trades about 0.0 of its potential returns per unit of risk. The Carvana Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,944  in Carvana Co on January 20, 2024 and sell it today you would earn a total of  4,171  from holding Carvana Co or generate 141.68% return on investment over 90 days.

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

LightInTheBox Holding Co  vs.  Carvana Co

LightInTheBox Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LightInTheBox Holding Co 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 basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Carvana

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LightInTheBox Holding and Carvana

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

The idea behind LightInTheBox Holding Co and Carvana Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.