Correlation Between Livetech and Bread Financial

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

By analyzing existing cross correlation between Livetech da Bahia and Bread Financial Holdings, you can compare the effects of market volatilities on Livetech and Bread Financial 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 Livetech with a short position of Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Livetech and Bread Financial.

Diversification Opportunities for Livetech and Bread Financial

-0.91

Correlation Coefficient

Livetech  Bread Financial

Pay attention - limited upside

The 3 months correlation between Livetech and Bread is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Livetech da Bahia and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings and Livetech 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 Livetech da Bahia are associated (or correlated) with Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Livetech i.e., Livetech and Bread Financial go up and down completely randomly.

Pair Corralation between Livetech and Bread Financial

Assuming the 90 days trading horizon Livetech da Bahia is expected to under-perform the Bread Financial. But the stock apears to be less risky and, when comparing its historical volatility, Livetech da Bahia is 1.47 times less risky than Bread Financial. The stock trades about -0.25 of its potential returns per unit of risk. The Bread Financial Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6,854  in Bread Financial Holdings on September 12, 2024 and sell it today you would earn a total of  2,946  from holding Bread Financial Holdings or generate 42.98% return on investment over 90 days.

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

Livetech da Bahia  vs.  Bread Financial Holdings

Livetech da Bahia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livetech da Bahia 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bread Financial Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Livetech and Bread Financial

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

The idea behind Livetech da Bahia and Bread Financial Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.