Correlation Between Coastal Capital and LiveChain

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

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

Diversification Opportunities for Coastal Capital and LiveChain

0.06

Correlation Coefficient

Coastal Capital  LiveChain

Significant diversification

The 3 months correlation between Coastal and LiveChain is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Capital Acq and LiveChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveChain and Coastal Capital 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 Coastal Capital Acq are associated (or correlated) with LiveChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveChain has no effect on the direction of Coastal Capital i.e., Coastal Capital and LiveChain go up and down completely randomly.

Pair Corralation between Coastal Capital and LiveChain

Given the investment horizon of 90 days Coastal Capital is expected to generate 2.71 times less return on investment than LiveChain. But when comparing it to its historical volatility, Coastal Capital Acq is 2.27 times less risky than LiveChain. It trades about 0.15 of its potential returns per unit of risk. LiveChain is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.16  in LiveChain on September 11, 2024 and sell it today you would earn a total of  0.10  from holding LiveChain or generate 62.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Coastal Capital Acq  vs.  LiveChain

Coastal Capital Acq

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Capital Acq are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Coastal Capital revealed solid returns over the last few months and may actually be approaching a breakup point.

LiveChain

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LiveChain are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, LiveChain demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coastal Capital and LiveChain

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

The idea behind Coastal Capital Acq and LiveChain 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.