Correlation Between Mistras and Liquidity Services

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

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

Diversification Opportunities for Mistras and Liquidity Services

-0.65

Correlation Coefficient

Mistras  Liquidity Services

Excellent diversification

The 3 months correlation between Mistras and Liquidity is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and Mistras 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 Mistras Group are associated (or correlated) with Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of Mistras i.e., Mistras and Liquidity Services go up and down completely randomly.

Pair Corralation between Mistras and Liquidity Services

Allowing for the 90-day total investment horizon Mistras Group is expected to under-perform the Liquidity Services. In addition to that, Mistras is 2.28 times more volatile than Liquidity Services. It trades about -0.06 of its total potential returns per unit of risk. Liquidity Services is currently generating about 0.18 per unit of volatility. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mistras Group  vs.  Liquidity Services

Mistras Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mistras Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Mistras and Liquidity Services

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

The idea behind Mistras Group and Liquidity Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.