Correlation Between Morningstar Total and LiCycle Holdings

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

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

Diversification Opportunities for Morningstar Total and LiCycle Holdings

0.25

Correlation Coefficient

Morningstar Total  LiCycle Holdings

Modest diversification

The 3 months correlation between Morningstar and LiCycle is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Total Return and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp and Morningstar Total 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 Morningstar Total Return are associated (or correlated) with LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of Morningstar Total i.e., Morningstar Total and LiCycle Holdings go up and down completely randomly.

Pair Corralation between Morningstar Total and LiCycle Holdings

Assuming the 90 days horizon Morningstar Total Return is expected to generate 0.04 times more return on investment than LiCycle Holdings. However, Morningstar Total Return is 27.52 times less risky than LiCycle Holdings. It trades about -0.15 of its potential returns per unit of risk. LiCycle Holdings Corp is currently generating about -0.01 per unit of risk. If you would invest  895.00  in Morningstar Total Return on October 5, 2024 and sell it today you would lose (26.00) from holding Morningstar Total Return or give up 2.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Morningstar Total Return  vs.  LiCycle Holdings Corp

Morningstar Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Morningstar Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LiCycle Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Morningstar Total and LiCycle Holdings

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

The idea behind Morningstar Total Return and LiCycle Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.