Correlation Between Dr Foods and LiqTech International

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

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

Diversification Opportunities for Dr Foods and LiqTech International

0.78

Correlation Coefficient

Dr Foods  LiqTech International

Poor diversification

The 3 months correlation between DRFS and LiqTech is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dr Foods and LiqTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiqTech International and Dr Foods 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 Dr Foods are associated (or correlated) with LiqTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiqTech International has no effect on the direction of Dr Foods i.e., Dr Foods and LiqTech International go up and down completely randomly.

Pair Corralation between Dr Foods and LiqTech International

Given the investment horizon of 90 days Dr Foods is expected to generate 6.42 times more return on investment than LiqTech International. However, Dr Foods is 6.42 times more volatile than LiqTech International. It trades about 0.4 of its potential returns per unit of risk. LiqTech International is currently generating about -0.07 per unit of risk. If you would invest  2.40  in Dr Foods on December 28, 2024 and sell it today you would earn a total of  1.59  from holding Dr Foods or generate 66.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	11.67%
Values	Daily Returns

Dr Foods  vs.  LiqTech International

Dr Foods

Risk-Adjusted Performance

Very Strong

Over the last 90 days Dr Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively abnormal technical and fundamental indicators, Dr Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

LiqTech International

Risk-Adjusted Performance

Very Weak

Over the last 90 days LiqTech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dr Foods and LiqTech International

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

The idea behind Dr Foods and LiqTech International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.