Correlation Between Oriental Culture and Liquidity Services

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

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

Diversification Opportunities for Oriental Culture and Liquidity Services

-0.2

Correlation Coefficient

Oriental Culture  Liquidity Services

Good diversification

The 3 months correlation between Oriental and Liquidity is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Culture Holding and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and Oriental Culture 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 Oriental Culture Holding 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 Oriental Culture i.e., Oriental Culture and Liquidity Services go up and down completely randomly.

Pair Corralation between Oriental Culture and Liquidity Services

Considering the 90-day investment horizon Oriental Culture Holding is expected to generate 3.02 times more return on investment than Liquidity Services. However, Oriental Culture is 3.02 times more volatile than Liquidity Services. It trades about 0.2 of its potential returns per unit of risk. Liquidity Services is currently generating about -0.01 per unit of risk. If you would invest  117.00  in Oriental Culture Holding on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Oriental Culture Holding or generate 122.22% return on investment over 90 days.

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

Oriental Culture Holding  vs.  Liquidity Services

Oriental Culture Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Liquidity Services

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oriental Culture and Liquidity Services

The main advantage of trading using opposite Oriental Culture and Liquidity Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Culture 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 Oriental Culture Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.