Correlation Between Liquidity Services and Etsy

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

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

Diversification Opportunities for Liquidity Services and Etsy

0.59

Correlation Coefficient

Liquidity Services  Etsy

Very weak diversification

The 3 months correlation between Liquidity and Etsy is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Liquidity Services i.e., Liquidity Services and Etsy go up and down completely randomly.

Pair Corralation between Liquidity Services and Etsy

Given the investment horizon of 90 days Liquidity Services is expected to generate 0.96 times more return on investment than Etsy. However, Liquidity Services is 1.05 times less risky than Etsy. It trades about -0.01 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.07 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.  Etsy Inc

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.

Etsy Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Liquidity Services and Etsy

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

The idea behind Liquidity Services and Etsy Inc 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.