Correlation Between LiqTech International and Dr Foods

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

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

Diversification Opportunities for LiqTech International and Dr Foods

0.78

Correlation Coefficient

LiqTech International  Dr Foods

Poor diversification

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

Pair Corralation between LiqTech International and Dr Foods

Given the investment horizon of 90 days LiqTech International is expected to under-perform the Dr Foods. But the stock apears to be less risky and, when comparing its historical volatility, LiqTech International is 6.42 times less risky than Dr Foods. The stock trades about -0.07 of its potential returns per unit of risk. The Dr Foods is currently generating about 0.4 of returns per unit of risk over similar time horizon. 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

LiqTech International  vs.  Dr Foods

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.

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.

Pair Trading with LiqTech International and Dr Foods

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

The idea behind LiqTech International and Dr Foods 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.