Correlation Between Ziff Davis and LQR House

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

By analyzing existing cross correlation between Ziff Davis and LQR House Common, you can compare the effects of market volatilities on Ziff Davis and LQR House 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 Ziff Davis with a short position of LQR House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ziff Davis and LQR House.

Diversification Opportunities for Ziff Davis and LQR House

0.77

Correlation Coefficient

Ziff Davis  LQR House

Poor diversification

The 3 months correlation between Ziff and LQR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ziff Davis and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common and Ziff Davis 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 Ziff Davis are associated (or correlated) with LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of Ziff Davis i.e., Ziff Davis and LQR House go up and down completely randomly.

Pair Corralation between Ziff Davis and LQR House

Allowing for the 90-day total investment horizon Ziff Davis is expected to generate 0.2 times more return on investment than LQR House. However, Ziff Davis is 4.95 times less risky than LQR House. It trades about -0.02 of its potential returns per unit of risk. LQR House Common is currently generating about -0.08 per unit of risk. If you would invest  7,378  in Ziff Davis on October 5, 2024 and sell it today you would lose (1,900) from holding Ziff Davis or give up 25.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.14%
Values	Daily Returns

Ziff Davis  vs.  LQR House Common

Ziff Davis

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ziff Davis are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ziff Davis exhibited solid returns over the last few months and may actually be approaching a breakup point.

LQR House Common

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LQR House Common are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ziff Davis and LQR House

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

The idea behind Ziff Davis and LQR House Common 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.