Correlation Between Shopify and LiveChat Software

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

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

Diversification Opportunities for Shopify and LiveChat Software

-0.82

Correlation Coefficient

Shopify  LiveChat Software

Pay attention - limited upside

The 3 months correlation between Shopify and LiveChat is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and LiveChat Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveChat Software and Shopify 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 Shopify are associated (or correlated) with LiveChat Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveChat Software has no effect on the direction of Shopify i.e., Shopify and LiveChat Software go up and down completely randomly.

Pair Corralation between Shopify and LiveChat Software

Given the investment horizon of 90 days Shopify is expected to under-perform the LiveChat Software. But the stock apears to be less risky and, when comparing its historical volatility, Shopify is 1.67 times less risky than LiveChat Software. The stock trades about 0.0 of its potential returns per unit of risk. The LiveChat Software SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,101  in LiveChat Software SA on September 26, 2024 and sell it today you would earn a total of  0.00  from holding LiveChat Software SA or generate 0.0% return on investment over 90 days.

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

Shopify  vs.  LiveChat Software SA

Shopify

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

LiveChat Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveChat Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shopify and LiveChat Software

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

The idea behind Shopify and LiveChat Software SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.