Correlation Between United States and Livermore Investments

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

By analyzing existing cross correlation between United States Steel and Livermore Investments Group, you can compare the effects of market volatilities on United States and Livermore Investments 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 United States with a short position of Livermore Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Livermore Investments.

Diversification Opportunities for United States and Livermore Investments

-0.41

Correlation Coefficient

United States  Livermore Investments

Very good diversification

The 3 months correlation between United and Livermore is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Livermore Investments Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livermore Investments and United States 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 United States Steel are associated (or correlated) with Livermore Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livermore Investments has no effect on the direction of United States i.e., United States and Livermore Investments go up and down completely randomly.

Pair Corralation between United States and Livermore Investments

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Livermore Investments. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.12 times less risky than Livermore Investments. The stock trades about -0.26 of its potential returns per unit of risk. The Livermore Investments Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,550  in Livermore Investments Group on October 9, 2024 and sell it today you would earn a total of  700.00  from holding Livermore Investments Group or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

United States Steel  vs.  Livermore Investments Group

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Livermore Investments

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Livermore Investments

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

The idea behind United States Steel and Livermore Investments Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.