Correlation Between EverQuote and Locafy

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

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

Diversification Opportunities for EverQuote and Locafy

0.09

Correlation Coefficient

EverQuote  Locafy

Significant diversification

The 3 months correlation between EverQuote and Locafy is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Locafy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy and EverQuote 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 EverQuote Class A are associated (or correlated) with Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy has no effect on the direction of EverQuote i.e., EverQuote and Locafy go up and down completely randomly.

Pair Corralation between EverQuote and Locafy

Given the investment horizon of 90 days EverQuote Class A is expected to under-perform the Locafy. But the stock apears to be less risky and, when comparing its historical volatility, EverQuote Class A is 1.55 times less risky than Locafy. The stock trades about -0.04 of its potential returns per unit of risk. The Locafy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  572.00  in Locafy on September 2, 2024 and sell it today you would earn a total of  168.00  from holding Locafy or generate 29.37% return on investment over 90 days.

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

EverQuote Class A  vs.  Locafy

EverQuote Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EverQuote Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Locafy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EverQuote and Locafy

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

The idea behind EverQuote Class A and Locafy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.