Correlation Between Liquidity Services and Oriental Culture

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

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

Diversification Opportunities for Liquidity Services and Oriental Culture

-0.2

Correlation Coefficient

Liquidity Services  Oriental Culture

Good diversification

The 3 months correlation between Liquidity and Oriental is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Oriental Culture Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Culture Holding 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 Oriental Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Culture Holding has no effect on the direction of Liquidity Services i.e., Liquidity Services and Oriental Culture go up and down completely randomly.

Pair Corralation between Liquidity Services and Oriental Culture

Given the investment horizon of 90 days Liquidity Services is expected to under-perform the Oriental Culture. But the stock apears to be less risky and, when comparing its historical volatility, Liquidity Services is 3.02 times less risky than Oriental Culture. The stock trades about -0.01 of its potential returns per unit of risk. The Oriental Culture Holding is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Oriental Culture Holding on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Oriental Culture Holding or generate 122.22% return on investment over 90 days.

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

Liquidity Services  vs.  Oriental Culture Holding

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.

Oriental Culture Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liquidity Services and Oriental Culture

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

The idea behind Liquidity Services and Oriental Culture Holding 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 Global Correlations module to find global opportunities by holding instruments from different markets.