Correlation Between D MARKET and Liquidity Services

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

By analyzing existing cross correlation between D MARKET Electronic Services and Liquidity Services, you can compare the effects of market volatilities on D MARKET and Liquidity Services 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 D MARKET with a short position of Liquidity Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of D MARKET and Liquidity Services.

Diversification Opportunities for D MARKET and Liquidity Services

0.27

Correlation Coefficient

D MARKET  Liquidity Services

Modest diversification

The 3 months correlation between HEPS and Liquidity is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding D MARKET Electronic Services and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and D MARKET 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 D MARKET Electronic Services are associated (or correlated) with Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of D MARKET i.e., D MARKET and Liquidity Services go up and down completely randomly.

Pair Corralation between D MARKET and Liquidity Services

Given the investment horizon of 90 days D MARKET Electronic Services is expected to under-perform the Liquidity Services. In addition to that, D MARKET is 1.1 times more volatile than Liquidity Services. It trades about -0.04 of its total potential returns per unit of risk. Liquidity Services is currently generating about -0.01 per unit of volatility. If you would invest  3,247  in Liquidity Services on December 29, 2024 and sell it today you would lose (108.00) from holding Liquidity Services or give up 3.33% of portfolio value over 90 days.

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

D MARKET Electronic Services  vs.  Liquidity Services

D MARKET Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days D MARKET Electronic Services 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Liquidity Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liquidity Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Liquidity Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with D MARKET and Liquidity Services

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

The idea behind D MARKET Electronic Services and Liquidity Services 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.