Correlation Between Livent Corp and Albemarle Corp

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

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

Diversification Opportunities for Livent Corp and Albemarle Corp

0.75

Correlation Coefficient

Livent Corp  Albemarle Corp

Poor diversification

The 3 months correlation between Livent and Albemarle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Livent Corp and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp and Livent Corp 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 Livent Corp are associated (or correlated) with Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Livent Corp i.e., Livent Corp and Albemarle Corp go up and down completely randomly.

Pair Corralation between Livent Corp and Albemarle Corp

If you would invest  8,222  in Albemarle Corp on September 5, 2024 and sell it today you would earn a total of  2,685  from holding Albemarle Corp or generate 32.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Livent Corp  vs.  Albemarle Corp

Livent Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livent Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Livent Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Albemarle Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Albemarle Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Livent Corp and Albemarle Corp

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

The idea behind Livent Corp and Albemarle Corp 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.