Correlation Between Locafy and FaZe Holdings

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

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

Diversification Opportunities for Locafy and FaZe Holdings

-0.15

Correlation Coefficient

Locafy  FaZe Holdings

Good diversification

The 3 months correlation between Locafy and FaZe is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Locafy and FaZe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FaZe Holdings and Locafy 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 Locafy are associated (or correlated) with FaZe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FaZe Holdings has no effect on the direction of Locafy i.e., Locafy and FaZe Holdings go up and down completely randomly.

Pair Corralation between Locafy and FaZe Holdings

Given the investment horizon of 90 days Locafy is expected to generate 3.42 times more return on investment than FaZe Holdings. However, Locafy is 3.42 times more volatile than FaZe Holdings. It trades about 0.03 of its potential returns per unit of risk. FaZe Holdings is currently generating about -0.19 per unit of risk. If you would invest  800.00  in Locafy on August 31, 2024 and sell it today you would lose (60.00) from holding Locafy or give up 7.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.56%
Values	Daily Returns

Locafy  vs.  FaZe Holdings

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 unfluctuating technical and fundamental indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

FaZe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FaZe Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FaZe Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Locafy and FaZe Holdings

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

The idea behind Locafy and FaZe Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.