Correlation Between LIWANLI Innovation and ALi Corp

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

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

Diversification Opportunities for LIWANLI Innovation and ALi Corp

0.57

Correlation Coefficient

LIWANLI Innovation  ALi Corp

Very weak diversification

The 3 months correlation between LIWANLI and ALi is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding LIWANLI Innovation Co and ALi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALi Corp and LIWANLI Innovation 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 LIWANLI Innovation Co are associated (or correlated) with ALi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALi Corp has no effect on the direction of LIWANLI Innovation i.e., LIWANLI Innovation and ALi Corp go up and down completely randomly.

Pair Corralation between LIWANLI Innovation and ALi Corp

Assuming the 90 days trading horizon LIWANLI Innovation is expected to generate 3.32 times less return on investment than ALi Corp. But when comparing it to its historical volatility, LIWANLI Innovation Co is 4.66 times less risky than ALi Corp. It trades about 0.35 of its potential returns per unit of risk. ALi Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,145  in ALi Corp on October 11, 2024 and sell it today you would earn a total of  855.00  from holding ALi Corp or generate 27.19% return on investment over 90 days.

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

LIWANLI Innovation Co  vs.  ALi Corp

LIWANLI Innovation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIWANLI Innovation Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LIWANLI Innovation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ALi Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALi Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIWANLI Innovation and ALi Corp

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

The idea behind LIWANLI Innovation Co and ALi Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.