Correlation Between INTERSHOP Communications and Li-FT Power

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

By analyzing existing cross correlation between INTERSHOP Communications Aktiengesellschaft and Li FT Power, you can compare the effects of market volatilities on INTERSHOP Communications and Li-FT Power 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 INTERSHOP Communications with a short position of Li-FT Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERSHOP Communications and Li-FT Power.

Diversification Opportunities for INTERSHOP Communications and Li-FT Power

-0.5

Correlation Coefficient

INTERSHOP Communications  Li-FT Power

Very good diversification

The 3 months correlation between INTERSHOP and Li-FT is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and Li FT Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li FT Power and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft are associated (or correlated) with Li-FT Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li FT Power has no effect on the direction of INTERSHOP Communications i.e., INTERSHOP Communications and Li-FT Power go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and Li-FT Power

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to generate 0.55 times more return on investment than Li-FT Power. However, INTERSHOP Communications Aktiengesellschaft is 1.82 times less risky than Li-FT Power. It trades about 0.07 of its potential returns per unit of risk. Li FT Power is currently generating about 0.0 per unit of risk. If you would invest  174.00  in INTERSHOP Communications Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  19.00  from holding INTERSHOP Communications Aktiengesellschaft or generate 10.92% return on investment over 90 days.

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

INTERSHOP Communications Aktie  vs.  Li FT Power

INTERSHOP Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, INTERSHOP Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Li FT Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Li FT Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Li-FT Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INTERSHOP Communications and Li-FT Power

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

The idea behind INTERSHOP Communications Aktiengesellschaft and Li FT Power 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.