Correlation Between Olin and Livent Corp

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

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

Diversification Opportunities for Olin and Livent Corp

-0.29

Correlation Coefficient

Olin  Livent Corp

Very good diversification

The 3 months correlation between Olin and Livent is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Olin Corp. and Livent Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livent Corp and Olin 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 Olin Corporation are associated (or correlated) with Livent Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livent Corp has no effect on the direction of Olin i.e., Olin and Livent Corp go up and down completely randomly.

Pair Corralation between Olin and Livent Corp

If you would invest  2,495  in Livent Corp on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Livent Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Olin Corp.  vs.  Livent Corp

Olin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olin Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Livent Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livent Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Livent Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Olin and Livent Corp

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

The idea behind Olin Corporation and Livent 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.