Correlation Between Alto Ingredients and Livent Corp

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

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

Diversification Opportunities for Alto Ingredients and Livent Corp

-0.41

Correlation Coefficient

Alto Ingredients  Livent Corp

Very good diversification

The 3 months correlation between Alto and Livent is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and Livent Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livent Corp and Alto Ingredients 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 Alto Ingredients 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 Alto Ingredients i.e., Alto Ingredients and Livent Corp go up and down completely randomly.

Pair Corralation between Alto Ingredients and Livent Corp

If you would invest  160.00  in Alto Ingredients on September 16, 2024 and sell it today you would lose (14.00) from holding Alto Ingredients or give up 8.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

Alto Ingredients  vs.  Livent Corp

Alto Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Alto Ingredients and Livent Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Ingredients 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 Alto Ingredients 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.