Correlation Between Liontown Resources and Homeco Daily

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

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

Diversification Opportunities for Liontown Resources and Homeco Daily

0.84

Correlation Coefficient

Liontown Resources  Homeco Daily

Very poor diversification

The 3 months correlation between Liontown and Homeco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Liontown Resources and Homeco Daily Needs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeco Daily Needs and Liontown Resources 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 Liontown Resources are associated (or correlated) with Homeco Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeco Daily Needs has no effect on the direction of Liontown Resources i.e., Liontown Resources and Homeco Daily go up and down completely randomly.

Pair Corralation between Liontown Resources and Homeco Daily

Assuming the 90 days trading horizon Liontown Resources is expected to under-perform the Homeco Daily. In addition to that, Liontown Resources is 2.95 times more volatile than Homeco Daily Needs. It trades about -0.25 of its total potential returns per unit of risk. Homeco Daily Needs is currently generating about -0.06 per unit of volatility. If you would invest  121.00  in Homeco Daily Needs on October 7, 2024 and sell it today you would lose (3.00) from holding Homeco Daily Needs or give up 2.48% of portfolio value over 90 days.

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

Liontown Resources  vs.  Homeco Daily Needs

Liontown Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liontown Resources 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Homeco Daily Needs

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Liontown Resources and Homeco Daily

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

The idea behind Liontown Resources and Homeco Daily Needs 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.