Correlation Between Livermore Investments and Derwent London

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

By analyzing existing cross correlation between Livermore Investments Group and Derwent London PLC, you can compare the effects of market volatilities on Livermore Investments and Derwent London 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 Livermore Investments with a short position of Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of Livermore Investments and Derwent London.

Diversification Opportunities for Livermore Investments and Derwent London

-0.52

Correlation Coefficient

Livermore Investments  Derwent London

Excellent diversification

The 3 months correlation between Livermore and Derwent is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Livermore Investments Group and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC and Livermore Investments 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 Livermore Investments Group are associated (or correlated) with Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of Livermore Investments i.e., Livermore Investments and Derwent London go up and down completely randomly.

Pair Corralation between Livermore Investments and Derwent London

Assuming the 90 days trading horizon Livermore Investments Group is expected to generate 1.81 times more return on investment than Derwent London. However, Livermore Investments is 1.81 times more volatile than Derwent London PLC. It trades about 0.22 of its potential returns per unit of risk. Derwent London PLC is currently generating about -0.09 per unit of risk. If you would invest  5,000  in Livermore Investments Group on December 25, 2024 and sell it today you would earn a total of  1,875  from holding Livermore Investments Group or generate 37.5% return on investment over 90 days.

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

Livermore Investments Group  vs.  Derwent London PLC

Livermore Investments

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Derwent London PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Derwent London PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Livermore Investments and Derwent London

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

The idea behind Livermore Investments Group and Derwent London PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.