Correlation Between Big Rock and Lightspeed Commerce

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

By analyzing existing cross correlation between Big Rock Brewery and Lightspeed Commerce, you can compare the effects of market volatilities on Big Rock and Lightspeed Commerce 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 Big Rock with a short position of Lightspeed Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Rock and Lightspeed Commerce.

Diversification Opportunities for Big Rock and Lightspeed Commerce

-0.41

Correlation Coefficient

Big Rock  Lightspeed Commerce

Very good diversification

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

Pair Corralation between Big Rock and Lightspeed Commerce

Assuming the 90 days horizon Big Rock Brewery is expected to under-perform the Lightspeed Commerce. In addition to that, Big Rock is 1.97 times more volatile than Lightspeed Commerce. It trades about -0.03 of its total potential returns per unit of risk. Lightspeed Commerce is currently generating about 0.05 per unit of volatility. If you would invest  2,192  in Lightspeed Commerce on October 9, 2024 and sell it today you would earn a total of  129.00  from holding Lightspeed Commerce or generate 5.89% return on investment over 90 days.

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

Big Rock Brewery  vs.  Lightspeed Commerce

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lightspeed Commerce

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lightspeed Commerce are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lightspeed Commerce may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Big Rock and Lightspeed Commerce

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

The idea behind Big Rock Brewery and Lightspeed Commerce 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.