Correlation Between Liquidity Services and Solo Brands

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

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

Diversification Opportunities for Liquidity Services and Solo Brands

0.58

Correlation Coefficient

Liquidity Services  Solo Brands

Very weak diversification

The 3 months correlation between Liquidity and Solo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands and Liquidity Services 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 Liquidity Services are associated (or correlated) with Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Liquidity Services i.e., Liquidity Services and Solo Brands go up and down completely randomly.

Pair Corralation between Liquidity Services and Solo Brands

Given the investment horizon of 90 days Liquidity Services is expected to generate 0.27 times more return on investment than Solo Brands. However, Liquidity Services is 3.67 times less risky than Solo Brands. It trades about -0.01 of its potential returns per unit of risk. Solo Brands is currently generating about -0.23 per unit of risk. If you would invest  3,247  in Liquidity Services on December 29, 2024 and sell it today you would lose (108.00) from holding Liquidity Services or give up 3.33% of portfolio value over 90 days.

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

Liquidity Services  vs.  Solo Brands

Liquidity Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liquidity Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Liquidity Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Solo Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Liquidity Services and Solo Brands

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

The idea behind Liquidity Services and Solo Brands 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.