Correlation Between Liquidity Services and Phonex

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

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

Diversification Opportunities for Liquidity Services and Phonex

0.05

Correlation Coefficient

Liquidity Services  Phonex

Significant diversification

The 3 months correlation between Liquidity and Phonex is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Liquidity Services and Phonex Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phonex 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 Phonex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phonex Inc has no effect on the direction of Liquidity Services i.e., Liquidity Services and Phonex go up and down completely randomly.

Pair Corralation between Liquidity Services and Phonex

Given the investment horizon of 90 days Liquidity Services is expected to generate 0.59 times more return on investment than Phonex. However, Liquidity Services is 1.7 times less risky than Phonex. It trades about 0.18 of its potential returns per unit of risk. Phonex Inc is currently generating about 0.03 per unit of risk. If you would invest  2,122  in Liquidity Services on August 31, 2024 and sell it today you would earn a total of  435.00  from holding Liquidity Services or generate 20.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Liquidity Services  vs.  Phonex Inc

Liquidity Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidity Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Liquidity Services unveiled solid returns over the last few months and may actually be approaching a breakup point.

Phonex Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phonex Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Phonex is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Liquidity Services and Phonex

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

The idea behind Liquidity Services and Phonex 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.