Correlation Between Livermore Investments and Gear4music Plc

Can any of the company-specific risk be diversified away by investing in both Livermore Investments and Gear4music Plc 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 Gear4music Plc 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 Gear4music Plc, you can compare the effects of market volatilities on Livermore Investments and Gear4music Plc 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 Gear4music Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Livermore Investments and Gear4music Plc.

Diversification Opportunities for Livermore Investments and Gear4music Plc

-0.5

Correlation Coefficient

Livermore Investments  Gear4music Plc

Very good diversification

The 3 months correlation between Livermore and Gear4music is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Livermore Investments Group and Gear4music Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear4music 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 Gear4music Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear4music Plc has no effect on the direction of Livermore Investments i.e., Livermore Investments and Gear4music Plc go up and down completely randomly.

Pair Corralation between Livermore Investments and Gear4music Plc

Assuming the 90 days trading horizon Livermore Investments is expected to generate 2.46 times less return on investment than Gear4music Plc. But when comparing it to its historical volatility, Livermore Investments Group is 3.11 times less risky than Gear4music Plc. It trades about 0.23 of its potential returns per unit of risk. Gear4music Plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  15,500  in Gear4music Plc on September 14, 2024 and sell it today you would earn a total of  1,250  from holding Gear4music Plc or generate 8.06% 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.  Gear4music Plc

Livermore Investments

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gear4music Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Gear4music Plc is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Livermore Investments and Gear4music Plc

The main advantage of trading using opposite Livermore Investments and Gear4music Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Livermore Investments position performs unexpectedly, Gear4music Plc 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 Gear4music Plc will offset losses from the drop in Gear4music Plc's long position.

The idea behind Livermore Investments Group and Gear4music 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.