Correlation Between Shopify and LQwD FinTech

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

By analyzing existing cross correlation between Shopify and LQwD FinTech Corp, you can compare the effects of market volatilities on Shopify and LQwD FinTech 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 LQwD FinTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and LQwD FinTech.

Diversification Opportunities for Shopify and LQwD FinTech

0.66

Correlation Coefficient

Shopify  LQwD FinTech

Poor diversification

The 3 months correlation between Shopify and LQwD is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and LQwD FinTech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQwD FinTech Corp 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 LQwD FinTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQwD FinTech Corp has no effect on the direction of Shopify i.e., Shopify and LQwD FinTech go up and down completely randomly.

Pair Corralation between Shopify and LQwD FinTech

Given the investment horizon of 90 days Shopify is expected to generate 2.27 times less return on investment than LQwD FinTech. But when comparing it to its historical volatility, Shopify is 2.38 times less risky than LQwD FinTech. It trades about 0.21 of its potential returns per unit of risk. LQwD FinTech Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  44.00  in LQwD FinTech Corp on August 30, 2024 and sell it today you would earn a total of  58.00  from holding LQwD FinTech Corp or generate 131.82% return on investment over 90 days.

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

Shopify  vs.  LQwD FinTech Corp

Shopify

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

LQwD FinTech Corp

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Shopify and LQwD FinTech

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

The idea behind Shopify and LQwD FinTech 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.