Correlation Between Stellar and LIWANLI Innovation

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

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

Diversification Opportunities for Stellar and LIWANLI Innovation

0.48

Correlation Coefficient

Stellar  LIWANLI Innovation

Very weak diversification

The 3 months correlation between Stellar and LIWANLI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and LIWANLI Innovation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIWANLI Innovation and Stellar 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 Stellar are associated (or correlated) with LIWANLI Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIWANLI Innovation has no effect on the direction of Stellar i.e., Stellar and LIWANLI Innovation go up and down completely randomly.

Pair Corralation between Stellar and LIWANLI Innovation

Assuming the 90 days trading horizon Stellar is expected to generate 9.79 times more return on investment than LIWANLI Innovation. However, Stellar is 9.79 times more volatile than LIWANLI Innovation Co. It trades about 0.25 of its potential returns per unit of risk. LIWANLI Innovation Co is currently generating about 0.12 per unit of risk. If you would invest  9.19  in Stellar on October 11, 2024 and sell it today you would earn a total of  32.81  from holding Stellar or generate 357.02% return on investment over 90 days.

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

Stellar  vs.  LIWANLI Innovation Co

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

LIWANLI Innovation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIWANLI Innovation Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LIWANLI Innovation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stellar and LIWANLI Innovation

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

The idea behind Stellar and LIWANLI Innovation Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..